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Exam 24: Responsibility Accounting and Performance Evaluation

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Question 81

True/False

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Centralized companies split their operations into segments and top management delegates decision making to the segment managers.

A) True
B) False

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Question 82

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Katsu,Inc.has a small car division that operates as a profit center.Below is a partially completed responsibility report for the first quarter. Compute the percentage variance for the flexible budget variance for sales revenue.(Round your answer to two decimal places. )

A) 1) 71% F
B) 1) 71% U
C) 4) 04% U
D) 4) 04% F

E) A) and C)
F) B) and D)

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Question 83

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In general,calculating ROI based on the gross book value of assets gives managers an incentive to continue using old,outdated equipment.

Sandpiper Inc.has a division that manufactures a component that sells for $150 and has a variable cost of $30.Another division of the company wants to purchase the component.Fixed cost per unit of the component is $20.What is the minimum transfer price if the division is operating at capacity?

The manager of a cost center is responsible for controlling costs and generating revenues for the company.

If upper management uses a short time frame to calculate ROI and RI,division managers have an incentive to take actions that will lead to an immediate increase in these measures.

When a division is operating at capacity,the transfer price should be ________.

Uniox,Inc.intends to increase its profits by 50% in the next fiscal year.Which of the following is most likely to be a lag indicator in Uniox's performance report?

Fill in the blank with the phrase that best completes the sentence. -The maintenance department at the local museum is a(n) ________.

The production manager is responsible for ________.

Which of the following is a disadvantage of decentralization?

Sea Cruise Equipment Company has several divisions that are investment centers.Data for the Boat Division and the Trailer Division are shown here: With regard to the efficient use of assets,the Boat Division has a higher return on investment (ROI)because it has the highest operating income.

The practice of comparing a company's achievements against the best practices in the industry is known as goal congruence.

Define market-based transfer price.When should market-based transfer pricing be used? Explain your answer.

Decentralization may cause the company to duplicate certain costs or activities.

An investment center manager is responsible for generating profits and managing invested capital.

Rosales Enterprises has a forklift division that operates as a profit center.Below is a partially completed responsibility report for the first quarter.Complete the responsibility report.(Round percentages to one decimal place. )

Net income is used in the numerator of the return on investment formula.

The return on investment formula focuses on the amount of operating income earned before considering other revenue and expense items,such as interest expense.

Operating income alone does not indicate how efficiently a segment is using its assets.