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Exam 23: Decentralized Operations

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Question 91

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The ratio of sales to invested assets is termed the investment turnover component of the return on investment.

A) True
B) False

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Question 92

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Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are termed direct operating expenses.

A) True
B) False

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Question 93

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

Developing and retaining quality managers are advantages of decentralization.

Ralston Company has income from operations of $75,000, invested assets of $360,000, and sales of $790,000.?Use the DuPont formula to calculate the return on investment, and show (a) the profit margin, (b) the investment turnover, and (c) return on investment. Round the profit margin percentage to two decimal places and the investment turnover to three decimal places.

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 Chicks is

If the profit margin for a division is 8% and the investment turnover is 1.2, the return on investment is 9.6%.

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

The sales, income from operations, and invested assets for each division of Wren Company are as follows:​ Management has established a minimum return for invested assets of 8%. (a)Determine the residual income for each division. (b)Based on residual income, which of the divisions is the most profitable?

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

A department store apportions payroll costs on the basis of the number of payroll checks issued. Accounting costs are apportioned on the basis of the number of reports. The payroll costs for the year were $231,000, and the accounting costs for the year totaled $75,500. The departments and the number of payroll checks and accounting reports for each are as follows:?? Determine the amount of (a) payroll cost and (b) accounting cost to be apportioned to each department.

The major shortcoming of income from operations as an investment center performance measure is that it ignores the amount of revenues earned by the center.

Use the data below for Coffee & Cocoa Company (a)Determine the divisional income from operations for the three regions by allocating the service department expenses proportionally to the sales of the regions. (b)Determine the increase or decrease in net income if Region C did not operate.??

If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the investment turnover is 1.2.

A centralized business organization is one in which all major planning and operating decisions are made by top management.

One of the advantages of decentralization is that delegating authority to managers closest to the operation always results in better decisions.

The investment turnover is the ratio of

How much will Division 3's income from operations increase?

Match each definition that follows with the term (a-e) it defines. -Ratio of income from operations to sales

The underlying principle of allocating direct operating expenses to departments is to assign to each department an amount of expense proportional to the revenues of that department.