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Exam 9: Evaluating Decentralized Operations

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Question 31

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The following data are taken from the management accounting reports of Dulcimer Co.: If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that

A) Division A's manager is given the bonus
B) Division B's manager is given the bonus
C) Division C's manager is given the bonus
D) Divisions B and C's managers divide the bonus

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

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Question 32

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ABC Corporation has three service departments with the following costs and activity base: What is the service department charge rate for Graphics Production?

A) $2.00
B) $10.00
C) $6.66
D) $0.50

E) C) and D)
F) All of the above

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Question 33

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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

If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the profit margin is 20%.

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.

The investment turnover is the ratio of

Which of the following is a disadvantage of decentralization?

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

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.

Responsibility accounting reports for profit centers will include

Two divisions of Oregano Company (Divisions TX and OY) have the same profit margins. Division TX's investment turnover is larger than that of Division OY (1.2 to 1.0) . Income from operations for Division TX is $55,000, and income from operations for Division OY is $43,000. Division TX has a higher return on investment than Division OY by

Materials used by Square Yard Products Inc. in producing Division 3's product are currently purchased from outside suppliers at a cost of $5 per unit. However, the same materials are available from Division 6. Division 6 has unused capacity and can produce the materials needed by Division 3 at a variable cost of $3 per unit. A transfer price of $3.20 per unit is established, and 40,000 units of material are transferred, with no reduction in Division 6's current sales. How much will Square Yard Products total income from operations increase?

ABC Corporation has three service departments with the following costs and activity base: What is the service department charge rate for the Accounting Department?

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 rate of return on investment, and show (a) the profit margin, (b) the investment turnover, and (c) rate of return on investment. Round the profit margin percentage to two decimal places and the investment turnover to three decimal places.

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

Division A of Chacha Company has sales of $140,000, cost of goods sold of $83,000, operating expenses of $43,000, and invested assets of $150,000. What is the investment turnover for Division A?

A manager in a cost center also has responsibility and authority over the revenues.

Several items are missing from the following table of rate of return on investment and residual income. Determine the missing items, identifying each item by the appropriate letter (a-l).  Round percentage values to one decimal point

In evaluating the profit center manager, the income from operations should be compared

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%. What is Clydesdale Company's rate of return on investment?