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Exam 23: Evaluating Decentralized Operations

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Question 71

Multiple Choice

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How much will Division A's income from operations increase?

A) $0
B) $75,000
C) $25,000
D) $50,000

E) All of the above
F) None of the above

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Question 72

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Determining the transfer price as the price at which the product or service transferred could be sold to outside buyers is known as the

A) cost price approach
B) negotiated price approach
C) revenue price approach
D) market price approach

E) A) and D)
F) B) and D)

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Question 73

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Assume that Division Blue has achieved a yearly income from operations of $110,000 using $900,000 of invested assets.If management has set a minimum acceptable rate of return of 11%,the residual income is

Which of the following is a measure of a manager's performance working in an investment center?

Under the negotiated price approach,the transfer price is the price at which the product or service transferred could be sold to outside buyers.

What is the rate of return on investment for Division A?

The amount of detail presented in a budget performance report for a cost center depends upon the level of management to which the report is directed.

In an investment center,the manager has responsibility and authority for making decisions that affect

The residual income for Chicks is

In an investment center,the manager has the responsibility and the authority to make decisions that affect not only costs and revenues,but also the plant assets invested in the center.

Responsibility accounting reports that are given to lower level managers are usually very detailed,in turn,higher level managers will be given a summary report.

What is Clydesdale Company's investment turnover?

The profit margin for Chicks is

The costs of services charged to a profit center on the basis of its use of those services are

If divisional income from operations is $75,000,invested assets are $737,500,and the minimum rate of return on invested assets is 6%,the residual income is $36,750.

The balanced scorecard is a set of financial and nonfinancial measures that reflect the performance of the business.

Income from operations of the Pierce Automobile Division is $2,225,000.If income from operations before service department charges is $3,250,000,

In rate of return on investment analysis,the investment turnover component focuses on efficiency in the use of assets and indicates the rate at which sales are being generated for each dollar of invested assets.

What is the profit margin for Division D?

The major advantage of residual income as a performance measure is that it gives consideration to not only a minimum rate of return on investment but also the total magnitude of income from operations earned by each division.