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Exam 8: Performance Evaluation for Decentralized Operations

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Question 91

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Moon Shoe Factory is an investment center and is responsible for all of their net income and the use of their assets. In 2012, the invested assets totaled $475,000 and net income was $125,000. What is the rate of return on assets?

A) 26.3%
B) 25.0%
C) 4.0%
D) 380.0%

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

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Question 92

Multiple Choice

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A responsibility center in which the department manager is responsible for costs, revenues, and assets for a department is called:

A) a cost center
B) a profit center
C) an operating center
D) an investment center

E) C) and D)
F) B) and D)

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Question 93

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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 Super Division be after all service department allocations?

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 is the service department charge rate for Graphics Production?

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31: The income from operations for the Rails Division is:

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 termed:

The sales, income from operations, and invested assets for each division of Marcus Company are as follows:

Xang Company's costs were over budget by $46,000. The Xang Company is divided in two regions. The first region's costs were over budget by $7,000. Required: Determine the amount that the second region's cost was over or under budget.

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

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

Mason Corporation had $650,000 in invested assets, sales of $700,000, income from operations amounting to $99,000, and a desired minimum rate of return of 15%. The residual income for Mason is:

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

The following is a measure of a manager's performance working in an investment center.

The manager of the furniture department of a leading retailer does not control the salaries of departmental personnel.

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

Materials used by Jefferson Company in producing Division C's product are currently purchased from outside suppliers at a cost of $10 per unit. However, the same materials are available from Division A. Division A has unused capacity and can produce the materials needed by Division C at a variable cost of $8.50 per unit. A transfer price of $9.50 per unit is negotiated and 25,000 units of material are transferred, with no reduction in Division A's current sales. How much would Division A's income from operations increase?

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31: The net income for Train Corporation is:

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%. What is Clydesdale Company's residual income?

Some items are omitted from each of the following condensed divisional income statements of Demi Inc.

Materials used by Square Yard Products Inc. in producing Division 3's product are currently purchased from outside suppliers at a cost of $5 per unit. However, the same materials are available from Division 6. Division 6 has unused capacity and can produce the materials needed by Division 3 at a variable cost of $3 per unit. A transfer price of $3.20 per unit is established, and 40,000 units of material are transferred, with no reduction in Division 6's current sales. How much would Square Yard Products total income from operations increase?