Question 1

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

Accepted Answer

A)   $350,000
B)   $100,000
C)   $125,000
D)   $550,000E) None of the above
F) A) and B)

Question 2

A responsibility center in which the authority over and responsibility for costs and revenues is vested in the department manager is termed a profit center.

Accepted Answer

A) True 
 B)False

Question 3

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.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A)   not only costs and revenues,but also assets invested in the center
B)   the assets invested in the center,but not costs and revenues
C)   both costs and revenues for the department or division
D)   costs and assets invested in the center,but not revenuesE) B) and D)
F) A) and C)

Question 5

The primary accounting tool for controlling and reporting for cost centers is a budget.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)   using income from operations as a performance measure
B)   comparing the profit margins
C)   applying a negotiated price measure
D)   using its assets more efficiently in generating salesE) All of the above
F) A) and D)

Question 7

By using the rate of return on investment as a divisional performance measure,divisional managers will always be motivated to invest in proposals which will increase the overall rate of return for the company.

Accepted Answer

A) True 
 B)False

Question 8

Central Division for Chemical Company has a rate of return on investment of 22% and an investment turnover of 1.4.What is the profit margin?

Accepted Answer

A)   20%
B)   15.7%
C)   14%
D)   6.36%E) A) and B)
F) A) and D)

Question 9

What is the profit margin for Division A?

Accepted Answer

A)   11.1%
B)   10.0%
C)   9.0%
D)   0.90%E) B) and D)
F) C) and D)

Question 10

The plant managers in a cost center can be held responsible for major differences between budgeted and actual costs in their plants.

Accepted Answer

A) True 
 B)False

Question 11

In a cost center,the manager has responsibility and authority for making decisions that affect

Accepted Answer

A)   revenues
B)   investments in assets
C)   both costs and revenues
D)   costsE) All of the above
F) A) and B)

Question 12

A manager is responsible for costs only in a(n)

Accepted Answer

A)   profit center
B)   investment center
C)   volume center
D)   cost centerE) None of the above
F) C) and D)

Question 13

The approach that required the transfer price to be less than the market price but greater than the supplying division's variable costs per unit is called the

Accepted Answer

A)   cost price approach
B)   negotiated cost approach
C)   standard cost approach
D)   market price approachE) None of the above
F) A) and C)

Question 14

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

Accepted Answer

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 bonusE) C) and D)
F) A) and B)

Question 15

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

Accepted Answer

A)   $150,000
B)   $50,000
C)   $32,000
D)   $72,000E) A) and B)
F) A) and C)

Exam 23: Evaluating Decentralized Operations

What is the profit margin for Division A?

Correct Answer
verified

Central Division for Chemical Company has a rate of return on investment of 22% and an investment turnover of 1.4.What is the profit margin?

Correct Answer
verified

A responsibility center in which the authority over and responsibility for costs and revenues is vested in the department manager is termed a profit center.

Correct Answer
verified

The primary accounting tool for controlling and reporting for cost centers is a budget.

Correct Answer
verified

Correct Answer
verified

By using the rate of return on investment as a divisional performance measure,divisional managers will always be motivated to invest in proposals which will increase the overall rate of return for the company.

Correct Answer
verified

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

Correct Answer
verified

The plant managers in a cost center can be held responsible for major differences between budgeted and actual costs in their plants.

Correct Answer
verified

The approach that required the transfer price to be less than the market price but greater than the supplying division's variable costs per unit is called the

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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.

Correct Answer
verified

A manager is responsible for costs only in a(n)

Correct Answer
verified

In a cost center,the manager has responsibility and authority for making decisions that affect

Correct Answer
verified

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

Correct Answer
verified

Exam 23: Evaluating Decentralized Operations

What is the profit margin for Division A?

Correct AnswerverifiedShow Answer

Central Division for Chemical Company has a rate of return on investment of 22% and an investment turnover of 1.4.What is the profit margin?

Correct AnswerverifiedShow Answer

A responsibility center in which the authority over and responsibility for costs and revenues is vested in the department manager is termed a profit center.

Correct AnswerverifiedShow Answer

The primary accounting tool for controlling and reporting for cost centers is a budget.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

By using the rate of return on investment as a divisional performance measure,divisional managers will always be motivated to invest in proposals which will increase the overall rate of return for the company.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The plant managers in a cost center can be held responsible for major differences between budgeted and actual costs in their plants.

Correct AnswerverifiedShow Answer

The approach that required the transfer price to be less than the market price but greater than the supplying division's variable costs per unit is called the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

A manager is responsible for costs only in a(n)

Correct AnswerverifiedShow Answer

In a cost center,the manager has responsibility and authority for making decisions that affect

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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