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Exam 23: Decentralized Operations

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Question 81

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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 the service department charge rate for the Accounting Department?

A) $714
B) $250
C) $625
D) $0.004

E) B) and C)
F) C) and D)

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Question 82

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If the profit margin for a division is 11% and the investment turnover is 1.5, the return on investment is 7.3%.

A) True
B) False

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Question 83

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The process of measuring and reporting operating data by responsibility centers is termed responsibility accounting.

Miller's Quarter Horse Company has sales of $4,500,000. It also has invested assets of $2,500,000 and operating expenses of $3,800,000. The company has established a minimum return of 7%. If needed, round to one decimal place. (a) What is Miller's profit margin? (b) What is the investment turnover? (c) What is the return on investment? (d) What is Miller's residual income?

Match each of the following phrases as describing (a) an advantage, (b) a disadvantage, or (c) neither of decentralization. -Separate sales forces

The Creative Division of Barry Company reported the following results for December:​​ Based on this information, what were sales?

Piano Company's costs were over budget by $47,000. Piano Company is divided into two regions. The first region's costs were over budget by $5,000. Determine the amount that the second region's costs were over or under budget.

The ratio of sales to invested assets, which is also a factor in the DuPont formula for determining the return on investment, is called

For higher levels of management, responsibility accounting reports

What is the investment turnover for Division A?

The excess of divisional income from operations over a minimum acceptable income from operations is termed the residual income.

The transfer price approach that uses a variety of cost concepts is the

Match each of the following phrases as describing (a) an advantage, (b) a disadvantage, or (c) neither of decentralization. -Responsibilities delegated to unit managers

Bentz Co. has two divisions, A and B. Invested assets and condensed income statement data for each division for the year ended December 31 are as follows:? (a)Prepare condensed income statements for the past year for each division. (b)Using the DuPont formula, determine the profit margin, investment turnover, and return on investment for each division. Round the profit margin percentage to two decimal places and investment turnover to four decimal places.

Transfer prices may be used when decentralized units are organized as cost, profit, or investment centers.

The sales, income from operations, invested assets, and residual income for each division of Marcus Company are as follows:​ Determine the minimum return for invested assets.

The ratio of income from operations to sales is termed the profit margin component of the return on investment.

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: ​ -The residual income for Mason is?

The balanced scorecard measures

Which of the following is a measure of a cost center manager's performance?