FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 23: Performance Evaluation for Decentralized Operations

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 61

Multiple Choice

Review LaterAdd Note

Review Later

ABC Corporation has three service departments with the following costs and activity base: ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information are as follows: What will the income of the Macro Division be after all service department allocations?

A) $780,000
B) $375,000
C) $575,000
D) $435,000

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

Correct Answer

verified

Show Answer

Question 62

Multiple Choice

Review LaterAdd Note

Review Later

ABC Corporation has three service departments with the following costs and activity base: ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information are as follows: What will the income of the Micro Division be after all service department allocations?

A) $305,000
B) $650,000
C) $345,000
D) $610,000

E) A) and B)
F) None of the above

Correct Answer

verified

Show Answer

Question 63

True/False

Review LaterAdd Note

A disadvantage to using the residual income performance measure is that it encourages managers to spend only the minimum acceptable rate of return on assets set by upper management.

The process of measuring and reporting operating data by areas of responsibility is termed responsibility accounting.

Office salaries expense for a department store is an indirect expense.

Using the data from the Terrace Industries, determine the divisional income from operations for Districts 1 & 2. Allocate service department expenses proportional to the sales of each district.

The DuPont formula uses financial and nonfinancial information to measure the performance of a business.

Which of the following is not one of the common types of responsibility centers?

Transfer prices may be used when decentralized units are organized as cost, profit, or investment centers.

If Division Q's income from operations was $30,000 on invested assets of $200,000, the rate of return on investment is 15%.

Income from operations for Division K is $220,000, and income from operations before service department charges is $975,000. Therefore:

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

The major advantage of the rate of return on investment over income from operations as a divisional performance measure is that divisional investment is directly considered and thus comparability of divisions is facilitated.

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.

The objective of transfer pricing is to encourage each division manager to transfer goods and services between divisions if overall company income can be increased by doing so.

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.

The sales, income from operations, and invested assets for each division of Wren Company are as follows: Management has established a minimum rate of return for invested assets of 8%.

A factor in determining the rate of return on investment--the ratio of income from operations to sales--is called:

It is beneficial for divisions in a company to negotiate a transfer price when the supplying division has unused capacity in its plant.

A responsibility center in which the department manager has responsibility for and authority over costs, revenues, and assets invested in the department is termed a cost center.