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Exam 23: Decentralized Operations

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Question 71

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

A) True
B) False

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Question 72

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What is the return on investment for Division A?

A) 9.3%
B) 99.3%
C) 74.6%
D) 4.6%

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

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Question 73

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Three measures of investment center performance are income from operations, return on investment, and residual income.

Division A reported income from operations of $975,000 and total service department charges of $675,000. As a result,

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

The sales, income from operations, and invested assets for each division of Grosbeak Company are as follows:​ (a)Using the DuPont formula, determine the profit margin, investment turnover, and return on investment for each division. Round profit margin percentage to two decimal places, investment turnover to four decimal places, and return on investment to one decimal place. (b)Which division is the most profitable per dollar invested?

The return on investment may be computed by multiplying investment turnover by the profit margin.

Ratio of sales to invested assets

Assume that Division Blue has achieved a yearly income from operations of $110,000 using $900,000 of invested assets. If management has set a minimum acceptable return of 11%, the residual income is

Most manufacturing plants are considered cost centers because they have control over

If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the profit margin is 20%.

Use this information for ABC Corporation to answer the questions that follow. ​ 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 is as follows: ​ -What will the income of the Micro Division be after all service department allocations?

An activity base is used to charge service department expenses. Match each of the following activity bases with the appropriate department (a-h) . -Number of miles

In evaluating the profit center manager, the income from operations should be compared

Under the negotiated price approach, the transfer price is the price at which the product or service transferred could be sold to outside buyers.

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

Match each definition that follows with the term (a-e) it defines. -Income from operations divided by invested assets

Some items are omitted from each of the following condensed divisional income statements of Demi Inc.? (a)Determine the amount of the missing items, identifying them by letter (a-f). (b)Based on income from operations, which division is the most profitable?

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

Use this information for ABC Corporation to answer the questions that follow. ​ 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 is as follows: ​ -The investment turnover for Mason is