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Exam 24: Evaluating Decentralized Operations

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Question 91

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

A) True
B) False

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Question 92

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Budget performance reports prepared for the vice president of production would generally contain less detail than reports prepared for the various plant managers.

A) True
B) False

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Question 93

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A franchise fee is often expressed as a percent of revenues earned by the franchisee.

Operating income of the Pierce Automobile Division is $2,225,000. If operating income before support department allocations is $3,250,000,

The sales, operating income, invested assets, and residual income for each division of Marcus Company are as follows: Determine the minimum return on invested assets

Materials used by Layton Company's Division 1 are currently purchased from outside supplier at $58 per unit. Division 2 is able to supply Division 1 with 20,000 units at a variable cost of $46 per unit. The two divisions have recently negotiated a transfer price of $50 per unit for the 20,000 units.​ a. By how much will each division's income increase as a result of this transfer? b. What is the total increase in income for Layton Company?

The profit center income statement should include only controllable revenues and expenses.

The process of measuring and reporting operating data by responsibility centers is termed responsibility accounting.

It is beneficial for divisions in a company to negotiate a transfer price when the supplying division has unused capacity in its plant.

The right or license granted to an individual or group to market another company's goods or services is called a franchise.

In return on investment analysis, the investment turnover component focuses on efficiency in the use of assets and indicates the rate at which sales are being generated for each dollar of invested assets.

The operating income of the Macro Division after all support department allocations will be

If the profit margin for a division is 8% and the investment turnover is 1.2, the return on investment is 9.6%.

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 _____ expenses.

A manager in a cost center also has responsibility and authority over the revenues.

Which of the following is a disadvantage of decentralization?

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

Mason Corporation had $650,000 in invested assets, sales of $700,000, operating income amounting to $99,000, and a desired minimum return on investment of 15%. -The investment turnover for Mason Corporation is

The operating income of the Super Division after all support department allocations will be

If divisional operating income is $75,000, invested assets are $737,500, and the minimum return on invested assets is 6%, the residual income is $36,750.