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Exam 24: Evaluating Decentralized Operations

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Question 61

True/False

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

A) True
B) False

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Question 62

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Division A reported operating income of $975,000 and total support department allocations of $675,000. As a result,

A) net income was $300,000
B) the gross profit was $300,000
C) operating income before support department allocations was $1,650,000
D) consolidated net income was $300,000

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

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Question 63

Multiple Choice

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The best measure of managerial efficiency in the use of investments in assets is

The Central Division of Nebraska Company has a return on investment of 28% and a profit margin of 14%. The investment turnover is

Responsibility accounting reports for profit centers will include

Clydesdale Company has sales of $4,500,000, invested assets of $2,000,000, and operating expenses of $3,600,000. The company has established a minimum return on investment of 7%. -Clydesdale Company's return on investment is

If the profit margin for a division is 11% and the investment turnover is 1.5, the return on investment is 7.3%.

The minimum accepted divisional operating income is set by top management by establishing a maximum return considered acceptable on invested assets.

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.

Clydesdale Company has sales of $4,500,000, invested assets of $2,000,000, and operating expenses of $3,600,000. The company has established a minimum return on investment of 7%. -Clydesdale Company's profit margin is

Using the data below for Coffee & Cocoa Company, determine the divisional operating income for the three regions by allocating the support department expenses proportional to the sales of the regions. Round final allocation amounts to the nearest whole dollar.​

Division D of Saunders Company has sales of $350,000, cost of goods sold of $120,000, operating expenses of $58,000, and invested assets of $150,000.​ -The profit margin for Division D is

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 on investment for the company.

In evaluating the profit center manager, the operating income should be compared

The ratio of sales to invested assets is termed the investment turnover component of the return on investment.

Which of the following is a measure of a manager's performance working in a profit center?

Division D of Saunders Company has sales of $350,000, cost of goods sold of $120,000, operating expenses of $58,000, and invested assets of $150,000.​ -The return on investment (ROI) for Division D is

Several items are missing from the following table of return on investment and residual income. Determine the missing items, identifying each item by the appropriate letter (a-l). Round percentages to one decimal place.

Data for Divisions A, B, C, D, and E are as follows: a.Determine the missing items, identifying each by letter (a-o).Round percentage and turnover values to one decimal place. b.Which division is most profitable in terms of operating income? c.Which division is most profitable in terms of return on investment?

Responsibility accounting reports that are given to lower-level managers are usually very detailed, while higher-level managers will be given a summary report.