Question 1

The balanced scorecard is a set of financial and nonfinancial measures that reflect the performance of the business.

Accepted Answer

A) True 
 B)False

Question 2

In an investment center,the manager has the responsibility and the authority to make decisions that affect not only costs and revenues,but also the plant assets invested in the center.

Accepted Answer

A) True 
 B)False

Question 3

The residual income for Chicks is

Accepted Answer

A)   $165,000
B)   $302,500
C)   $137,500
D)   $191,500E) A) and B)
F) A) and C)

Question 4

The costs of services charged to a profit center on the basis of its use of those services are

Accepted Answer

A)   operating expenses
B)   noncontrollable charges
C)   service department charges
D)   activity chargesE) B) and C)
F) C) and D)

Question 5

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.

Accepted Answer

A) True 
 B)False

Question 6

If divisional income from operations is $75,000,invested assets are $737,500,and the minimum rate of return on invested assets is 6%,the residual income is $36,750.

Accepted Answer

A) True 
 B)False

Question 7

What is Clydesdale Company's investment turnover?

Accepted Answer

A)   1.80
B)   2.25
C)   1.25
D)   1.4E) None of the above
F) C) and D)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Assume that Division Blue has achieved a yearly income from operations of $110,000 using $900,000 of invested assets.If management has set a minimum acceptable rate of return of 11%,the residual income is

Accepted Answer

A)   $99,000
B)   $691,000
C)   $209,000
D)   $11,000E) B) and C)
F) A) and B)

Question 10

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

Accepted Answer

A)   operating expenses are $1,025,000
B)   total service department charges are $1,025,000
C)   noncontrollable charges are $1,025,000
D)   direct manufacturing charges are $1,025,000E) None of the above
F) B) and D)

Question 11

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

Accepted Answer

A)   $0
B)   $75,000
C)   $25,000
D)   $50,000E) B) and C)
F) None of the above

Question 12

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

Accepted Answer

A)   rate of return on investment
B)   residual income
C)   divisional income statements
D)   all of theseE) B) and C)
F) All of the above

Question 13

The profit margin for Chicks is

Accepted Answer

A)   25%
B)   22%
C)   15%
D)   27.5%E) B) and D)
F) B) and C)

Question 14

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.

Accepted Answer

A) True 
 B)False

Question 15

Determining the transfer price as the price at which the product or service transferred could be sold to outside buyers is known as the

Accepted Answer

A)   cost price approach
B)   negotiated price approach
C)   revenue price approach
D)   market price approachE) C) and D)
F) A) and B)

Question 16

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.

Accepted Answer

A) True 
 B)False

Question 17

What is the profit margin for Division D?

Accepted Answer

A)   42.9%
B)   83.4%
C)   49.1%
D)   65.7%E) C) and D)
F) All of the above

Question 18

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

Accepted Answer

A)   9.3%
B)   99.3%
C)   74.6%
D)   4.6%E) A) and B)
F) None of the above

Question 19

The major advantage of residual income as a performance measure is that it gives consideration to not only a minimum rate of return on investment but also the total magnitude of income from operations earned by each division.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)   costs only
B)   revenues only
C)   assets only
D)   costs,revenues,and assetsE) B) and C)
F) A) and D)

Exam 23: Evaluating Decentralized Operations

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.

Correct AnswerverifiedShow Answer

In an investment center,the manager has the responsibility and the authority to make decisions that affect not only costs and revenues,but also the plant assets invested in the center.

Correct AnswerverifiedShow Answer

Determining the transfer price as the price at which the product or service transferred could be sold to outside buyers is known as the

Correct AnswerverifiedShow Answer

If divisional income from operations is $75,000,invested assets are $737,500,and the minimum rate of return on invested assets is 6%,the residual income is $36,750.

Correct AnswerverifiedShow Answer

The profit margin for Chicks is

Correct AnswerverifiedShow Answer

The major advantage of residual income as a performance measure is that it gives consideration to not only a minimum rate of return on investment but also the total magnitude of income from operations earned by each division.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The residual income for Chicks is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The costs of services charged to a profit center on the basis of its use of those services are

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is the profit margin for Division D?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The balanced scorecard is a set of financial and nonfinancial measures that reflect the performance of the business.

Correct AnswerverifiedShow Answer

Assume that Division Blue has achieved a yearly income from operations of $110,000 using $900,000 of invested assets.If management has set a minimum acceptable rate of return of 11%,the residual income is

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

What is Clydesdale Company's investment turnover?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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