Question 1

The Southern Division of Knucklehead Company has a rate of return on investment of 15% and an investment turnover of 1.2.What is the profit margin?

Accepted Answer

A)  1.5%
B)  12.5%
C)  0.67%
D)  6.67%E) A) and C)
F) A) and D)

Question 2

To calculate income from operations, total service department charges are

Accepted Answer

A)  added to income from operations before service department charges
B)  subtracted from operating expenses
C)  subtracted from income from operations before service department charges
D)  subtracted from gross profit marginE) A) and B)
F) A) and C)

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Businesses that are separated into two or more manageable units in which managers have authority and responsibility for operations are said to be

Accepted Answer

A)  decentralized
B)  consolidated
C)  diversified
D)  centralizedE) A) and C)
F) A) and D)

Question 5

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.
Determine the amount that the second region's cost was over or under budget.

Accepted Answer

$46,000 - ...

Question 6

The formula for the rate of return on investment is

Accepted Answer

A)  Invested assets/Income from operations
B)  Sales/Invested assets
C)  Income from operations/Sales
D)  Income from operations/Invested assetsE) All of the above
F) A) and B)

Question 7

The cost price approach for transfer pricing is most often used between responsibility centers organized as cost centers that are not concerned with the revenue.

Accepted Answer

A) True 
 B)False

Question 8

Investment centers differ from profit centers in that they

Accepted Answer

A)  are responsible for net income only
B)  are able to invest in assets
C)  have less responsibilities than cost centers and profit centers
D)  are only responsible for revenuesE) A) and C)
F) C) and D)

Question 9

Property tax expense for a department store's store equipment is an example of a direct expense.

Accepted Answer

A) True 
 B)False

Question 10

Which transfer price approach is used when the transfer price is set at the amount sold to outside buyers?

Accepted Answer

A)  market price
B)  cost price
C)  negotiated price
D)  variable priceE) A) and D)
F) B) and C)

Question 11

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 12

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 13

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 14

Managers of what type of decentralized units have authority and responsibility for revenues, costs, and assets invested in the unit?

Accepted Answer

A)  profit center
B)  investment center
C)  production center
D)  cost centerE) B) and C)
F) A) and B)

Question 15

If divisional income from operations is $100,000, invested assets are $850,000, and the minimum rate of return on invested assets is 8%, the residual income is $68,000.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

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

Question 17

What is the service department charge rate for Graphics Production?

Accepted Answer

A)  $2.00
B)  $10.00
C)  $6.66
D)  $0.50E) B) and D)
F) A) and D)

Question 18

What is Clydesdale Company's profit margin?

Accepted Answer

A)  20%
B)  80%
C)  44.4%
D)  18%E) B) and C)
F) A) and B)

Question 19

Responsibility accounting reports for profit centers are normally in the form of income statements.

Accepted Answer

A) True 
 B)False

Question 20

What is the service department charge rate for the Personnel Department?

Accepted Answer

A)  $2,758
B)  $3,200
C)  $3,077
D)  $1,000E) B) and C)
F) A) and C)

Exam 8: Performance Evaluation for Decentralized Operations

The cost price approach for transfer pricing is most often used between responsibility centers organized as cost centers that are not concerned with the revenue.

Correct AnswerverifiedShow Answer

Property tax expense for a department store's store equipment is an example of a direct expense.

Correct AnswerverifiedShow Answer

What is Clydesdale Company's profit margin?

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What is the service department charge rate for the Personnel Department?

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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.

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Responsibility accounting reports for profit centers are normally in the form of income statements.

Correct AnswerverifiedShow Answer

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. Determine the amount that the second region's cost was over or under budget.

Correct Answerverified$46,000 - ...View AnswerShow Answer

What is the service department charge rate for Graphics Production?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The formula for the rate of return on investment is

Correct AnswerverifiedShow Answer

Businesses that are separated into two or more manageable units in which managers have authority and responsibility for operations are said to be

Correct AnswerverifiedShow Answer

Investment centers differ from profit centers in that they

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Southern Division of Knucklehead Company has a rate of return on investment of 15% and an investment turnover of 1.2.What is the profit margin?

Correct AnswerverifiedShow Answer

If divisional income from operations is $100,000, invested assets are $850,000, and the minimum rate of return on invested assets is 8%, the residual income is $68,000.

Correct AnswerverifiedShow Answer

Which transfer price approach is used when the transfer price is set at the amount sold to outside buyers?

Correct AnswerverifiedShow Answer

To calculate income from operations, total service department charges are

Correct AnswerverifiedShow Answer

Managers of what type of decentralized units have authority and responsibility for revenues, costs, and assets invested in the unit?

Correct AnswerverifiedShow Answer

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$46,000 - ...
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