Question 1

What is the rate of return on investment for Division D?

Accepted Answer

A)   153.3%
B)   114.7%
C)   87.2%
D)   233%E) A) and D)
F) B) and C)

Question 2

The profit margin for Division C is 6% and the investment turnover is 1.2.What is the rate of return on investment for Division B?

Accepted Answer

A)   20%
B)   6.7%
C)   7.3%
D)   7.2%E) A) and B)
F) C) and D)

Question 3

Which of the following is not a measure that management can use in evaluating and controlling investment center performance?

Accepted Answer

A)   rate of return on investment
B)   negotiated price
C)   residual income
D)   income from operationsE) B) and C)
F) A) and C)

Question 4

The term used to describe expenses that are incurred by a specific department is

Accepted Answer

A)   indirect expenses
B)   margin expenses
C)   departmental expenses
D)   direct expensesE) A) and B)
F) None of the above

Question 5

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

Accepted Answer

A)   $0
B)   $75,000
C)   $12,500
D)   $50,000E) All of the above
F) B) and D)

Question 6

Operating expenses incurred for the entire business as a unit that are not subject to the control of individual department managers are called indirect expenses.

Accepted Answer

A) True 
 B)False  True

Question 7

Service department charges are similar to the expenses of a profit center that purchased services from a source outside the company.

Accepted Answer

A) True 
 B)False

Question 8

The gross profit for the Locomotive Division is

Accepted Answer

A)   $57,960
B)   $14,790
C)   $27,240
D)   $47,280E) B) and C)
F) None of the above

Question 9

How much service department cost would be allocated to the Macro Division?

Accepted Answer

A)   $405,000
B)   $175,000
C)   $130,000
D)   $305,000E) None of the above
F) B) and D) A

Question 10

Responsibility accounting reports for profit centers will include

Accepted Answer

A)   costs only
B)   revenues only
C)   expenses and fixed assets
D)   revenues,expenses,net income or loss from operationsE) A) and D)
F) All of the above

Question 11

For higher levels of management,responsibility accounting reports

Accepted Answer

A)   are more detailed than for lower levels of management
B)   are more summarized than for lower levels of management
C)   contain about the same level of detail as reports for lower levels of management
D)   are rarely provided or reviewedE) C) and D)
F) B) and D)

Question 12

Budget performance reports prepared for the vice president of production would generally contain less detail than reports prepared for the various plant managers.

Accepted Answer

A) True 
 B)False  True

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A)   miscellaneous administrative expenses
B)   direct operating expenses
C)   indirect expenses
D)   fixed expensesE) A) and C)
F) B) and C)

Question 16

Some organizations use internal service departments to provide like services to several divisions or departments within an organization.Which of the following would probably not lend itself as a service department?

Accepted Answer

A)   inventory control
B)   payroll accounting
C)   information systems
D)   human resourcesE) B) and D)
F) None of the above

Question 17

Income from operations for Division H is $220,000,and income from operations before service department charges is $975,000.As a result,

Accepted Answer

A)   total operating expenses are $565,000
B)   total manufacturing expenses are $565,000
C)   direct materials,direct labor,and factory overhead total $565,000
D)   total service department charges are $755,000E) A) and D)
F) B) and C)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following expenses incurred by the sporting goods department of a department store is a direct expense?

Accepted Answer

A)   depreciation expense-office equipment
B)   insurance on inventory of sporting goods
C)   uncollectible accounts expense
D)   office salariesE) C) and D)
F) B) and D)

Exam 23: Evaluating Decentralized Operations

What is the rate of return on investment for Division D?

Correct AnswerverifiedShow Answer

The profit margin for Division C is 6% and the investment turnover is 1.2.What is the rate of return on investment for Division B?

Correct AnswerverifiedShow Answer

Which of the following is not a measure that management can use in evaluating and controlling investment center performance?

Correct AnswerverifiedShow Answer

The term used to describe expenses that are incurred by a specific department is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Operating expenses incurred for the entire business as a unit that are not subject to the control of individual department managers are called indirect expenses.

Correct AnswerverifiedTrue

Service department charges are similar to the expenses of a profit center that purchased services from a source outside the company.

Correct AnswerverifiedShow Answer

The gross profit for the Locomotive Division is

Correct AnswerverifiedShow Answer

How much service department cost would be allocated to the Macro Division?

Correct AnswerverifiedA

Responsibility accounting reports for profit centers will include

Correct AnswerverifiedShow Answer

For higher levels of management,responsibility accounting reports

Correct AnswerverifiedShow Answer

Budget performance reports prepared for the vice president of production would generally contain less detail than reports prepared for the various plant managers.

Correct AnswerverifiedTrue

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Some organizations use internal service departments to provide like services to several divisions or departments within an organization.Which of the following would probably not lend itself as a service department?

Correct AnswerverifiedShow Answer

Income from operations for Division H is $220,000,and income from operations before service department charges is $975,000.As a result,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Which of the following expenses incurred by the sporting goods department of a department store is a direct expense?

Correct AnswerverifiedShow Answer

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