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Exam 23: Decentralized Operations

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Question 51

Multiple Choice

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Match each of the following phrases as describing (a) an advantage, (b) a disadvantage, or (c) neither of decentralization. -Operational issues are made by managers closest to the operations

A) Advantage of decentralization
B) Disadvantage of decentralization
C) Neither an advantage nor a disadvantage

D) A) and B)
E) All of the above

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Question 52

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A responsibility center in which the authority over and responsibility for costs and revenues is vested in the department manager is termed a profit center.

A) True
B) False

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Question 53

Multiple Choice

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Tom's Tool Factory is an investment center and is responsible for all of its net income and the use of its assets. This year, the invested assets totaled $475,000, and net income was $275,000. What is the return on investment?

Blaser Corporation had $275,000 in invested assets, sales of $330,000, income from operations amounting to $33,000, and a desired minimum return of 7.5%. The return on investment for Blaser Corporation is

Use this information for Train Corporation to answer the questions that follow. ​ The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31: ​ -The gross profit for the Rails Division is

Use this information for ABC Corporation to answer the questions that follow. ​ ABC Corporation has three service departments with the following costs and activity base: ​ ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information is as follows: ​ -What is Clydesdale Company's investment turnover?

Use this information for ABC Corporation to answer the questions that follow. ​ ABC Corporation has three service departments with the following costs and activity base: ​ ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information is as follows: ​ -How much service department cost will be allocated to the Micro Division?

If Division Q's yearly income from operations is $30,000 on invested assets of $200,000, the return on investment is 15%.

Managers of what type of decentralized units have authority and responsibility for revenues, costs, and assets invested in the unit?

Which of the following expressions is termed the profit margin factor as used in determining the return on investment?

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

Separation of businesses into more manageable operating units is termed decentralization.

The materials used by Holly Company's Division A are currently purchased from an outside supplier. Division B is able to supply Division A with 20,000 units at a variable cost of $42 per unit. The normal price for which Division B normally sells its units is $53 per unit. What is the range of transfer prices within which the two division managers should negotiate?

An activity base is used to charge service department expenses. Match each of the following activity bases with the appropriate department (a-h) . -Number of advertising campaigns

Investment turnover (as used in determining the return on investment) focuses on the rate of profit earned on each sales dollar.

Which of the following is not​ a commonly used approach to setting transfer prices?

The materials used by Hibiscus Company's Division A are currently purchased from an outside supplier at $55 per unit. Division B is able to supply Division A with 20,000 units at a variable cost of $42 per unit. The two divisions have recently negotiated a transfer price of $48 per unit for the 20,000 units. (a) By how much will each division's income increase as a result of this transfer? (b) What is the total increase in income for Hibiscus Company?

Use this information for ABC Corporation to answer the questions that follow. ​ ABC Corporation has three service departments with the following costs and activity base: ​ ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information is as follows: ​ -What is Clydesdale Company's residual income?

The cost price approach for transfer pricing is most often used between responsibility centers organized as cost centers that are not concerned with the revenue.

A responsibility center in which the department manager has responsibility for and authority over costs, revenues, and assets invested in the department is termed a cost center.