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Exam 8: Performance Evaluation for Decentralized Operations

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Question 61

True/False

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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.

A) True
B) False

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Question 62

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A manager is responsible for costs only in an

A) profit center
B) investment center
C) volume center
D) cost center

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

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Question 63

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Data for Divisions A, B, C, D, and E are as follows: a Determine the missing items, identifying each by letter a-o. b Which division is most profitable in terms of income from operations? c Which division is most profitable in terms of rate of return on investment? Round percentage and turnover values to one decimal point.

Controllable expenses are those that can be influenced by the decisions of the profit center management.

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

A responsibility center in which the department manager has responsibility for and authority over costs and revenues is called an

Which of the following is not a disadvantage of decentralized operation?

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.

Depreciation expense on store equipment for a department store is an indirect expense.

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 additional information is needed to calculate the rate of return on investment if income from operations is known?

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

What is the investment turnover?

How much will Square Yard Products total income from operations increase?

An activity base is used to charge service department expenses.Match each of the following activity bases with the appropriate department a-h. -Allocated equally among divisions

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 work orders

The minimum acceptable divisional income from operations is set by top management by establishing a minimum rate of return considered acceptable for invested assets.

Purchase requisitions for Purchasing and the number of payroll checks for Payroll Accounting are examples of activity bases.

In a profit center, the department manager has responsibility for and the authority to make decisions that affect

The following financial information was summarized from the accounting records of Buddy Corporation for the current year ended December 31: Calculate: a The gross profit for the Dalmatian Division. b The income from operations from the Dalmatian Division. c The gross profit for the Beagle Division. d The income from operations from the Beagle Division. e The net income for the Buddy Corporation.