FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 8: Performance Evaluation for Decentralized Operations

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

True/False

Review LaterAdd Note

Review Later

The primary disadvantage of decentralized operations is that decisions made by one manager may affect other managers in such a way that the profitability of the entire company may suffer.

A) True
B) False

Correct Answer

verified

Show Answer

Question 22

Multiple Choice

Review LaterAdd Note

Review Later

Which one of the following is NOT a measure that management can use in evaluating and controlling investment center performance?

A) Rate of return on investment
B) Negotiated price
C) Residual income
D) Income from operations

E) All of the above
F) C) and D)

Correct Answer

verified

Show Answer

Question 23

Multiple Choice

Review LaterAdd Note

The Everest Company has income from operations of $80,000, invested assets of $500,000, and sales of $1,050,000. What is the investment turnover?

All of the following are advantages of decentralization except:

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

The manager of a profit center does not make decisions concerning the fixed assets invested in the center.

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

The ratio of sales to investment is termed the rate of return on investment.

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.

Several items are missing from the following table of rate of return on investment and residual income. Determine the missing items, identifying each item by the appropriate letter.

The minimum amount of desired divisional income from operations is set by top management by establishing a minimum rate of return considered acceptable for invested assets.

What is the term used to describe expenses that are incurred for the benefit of a specific department?

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

Using the data from the Ace Guitar Company, determine the divisional income from operations for the A and B regions.

If income from operations for a division is $30,000, sales are $263,750, and invested assets are $187,500, the investment turnover is 1.3.

The rates at which services are charged to each division are called service department charge rates.

Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income from operations amounting to $302,500, and a desired minimum rate of return of 15%. The investment turnover for Chicks is:

Mandolin Company has two divisions. Division A is interested in purchasing 10,000 units from Division B. Capacity is available for Division B to produce these units. The per unit market price is $30 per unit, with a variable cost of $17. The manager of Division A has offered to purchase the units at $15 per unit. In an effort to make this transfer price beneficial for the company as a whole, what is the range of prices that should be used during negotiations between the two divisions?

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 Jefferson's total 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 gross profit for the Locomotive Division is: