Accounting 2 Ch. 24

All of the following are advantages of decentralization except: a. Decentralization delegates authority to top managers. b. Decentralization helps retain managers. c. Decentralization allows managers closest to the operations to make the decisions. d. Decentralization provides managers with excellent training.

Which of the following is a disadvantage of decentralization? a. Decisions made by one manager may not be the best decision for the entire company. b. Managers work closely with customers. c. Managers make decisions in only their areas of expertise. d. It typically provides excellent training for managers.

Responsibility accounting reports for profit centers most often take the form of: a. Statement of cash flows. b. Balance sheets. c. None of these choices are correct. d. Income statements.

A cost center manager would only make decisions about which of the following? a. Sales. b. The amount of fixed assets. c. The costs of improperly trained employees. d. Investments for the center

A department that provides a service for internal departments is called a(n) __________ department. a. Internal b. Service c. Charge out d. Cost

Determine the rate of return on investment using the following information: Income from Operations $600,000 Sales $4,600,000 Invested Assets $2,000,000 a. 13.04% b. 76.92% c. 30.0% d. 23.0%

An investment center has responsibility for: a. Costs and investments. b. Revenues and investments. c. Costs, revenues, and investments. d. Investments.

The transfer price approach that would be used by two related companies if the supplying company is currently using all of its capacity and can sell to outside customers is the __________ approach. a. Market price b. Cost price c. Related price d. Negotiated price

The cost price approach for transfer pricing will likely fail when the operations are a. Decentralized and are cost or profit centers. b. Decentralized and are either profit or investment centers. c. Centralized and are cost centers. d. Decentralized and are cost centers.

The payroll department provides services for several plants in the city of Yee Haw Junction. The payroll department's budget is $100,000 and pays 4,000 checks every other week. The lighting plant has 1,000 employees. How much should the lighting plant be charged from the payroll department for its services? a. $20,000 b. Cannot be determined with the information given. c. $4,000 d. $25,000

According to the DuPont formula, two factors affect the rate earned on total assets. They are a. Sales and investment turnover. b. Profit margin and investment turnover. c. Sales and assets. d. Net income and investment turnover.

A manager of a cost center has responsibility for: a. Costs only. b. Costs and profit. c. Costs, profit, investments. d. Costs and investments.

Bright Times Company manufactures table lamps. It purchases 50,000 light bulbs from an outside supplier for $.60 per unit. Neon Company, a sister company, makes the same light bulb. Currently, Neon has excess production of 70,000 units. Each light bulb is sold for $.60 per unit and has a variable cost of $.25. Using the negotiated approach, determine the increase in income for Bright Times Company if the negotiated price between Bright Times and Neon is $.45. a. $10,000 b. $17,500 c. Loss of $7,500 d. $7,500

A centralized business is one in which: a. All major planning and operating decisions are made by top management. b. All sales are done in one location. c. The owner/manager has little to do with day-to-day business. d. A central location is where the administrative offices are housed.

The report received by the plant manager would be: a. A summary of all the plants and departments under his/her responsibility. b. A detailed itemized report for each of the plants. c. Similar to an annual report. d. A summary of all of the operations in the company

The manager of an investment center has responsibility and authority to make decisions that affect: a. Sales. b. Costs. c. Sales, costs, fixed assets. d. Fixed assets.

Which of the following statements are true?regarding decentralized operations? a. Top management makes the operational decisions in a decentralized company, because they maintain daily contact with all operations. b. Division managers in decentralized operations often work closely with customers. c. Operational decisions made within a decentralized company always result in positive profits for the entire company. d. Top management makes the operational decisions in a decentralized company, because they maintain operating expertise in all product lines and services

Which of the following would operate as a cost center? a. A department store b. A doctor's office c. A restaurant d. A manufacturing plant for a large corporation

A centralized legal department of Exline Company has expenses of $500,000. The department has provided a total of 2,000 hours of service for the period. The Northern Region has used 575 hours of legal service and the Southern Region has used 1,425 hours of legal service during the period. How much should the Southern Region be charged for legal services? a. $142,500 b. $250,000 c. $356,250 d. $143,750

The Blueberry Pie Company has given you the following information and has asked you to calculate the residual income if the minimum acceptable income from operation as a percent of assets is 12%: Sales $4,300,000 Costs and Expenses $2,700,000 Invested Assets $10,000,000 a. $120,000 b. $516,000 c. $400,000 d. $324,000

The Blueberry Pie Company has given you the following information and has asked you to calculate the rate of return on investment: Sales $4,300,000 Costs & Expenses $2,700,000 Invested Assets $10,000,000 a. 43.0% b. 16.0% c. 27.0% d. 62.8%

Bright Times Company manufactures table lamps. It is currently purchasing 50,000 light bulbs from an outside supplier for $.60 per unit. Neon Company, a sister company, makes the same light bulb. Currently Neon has excess production of 70,000 units. Each light bulb is sold for $.60 per unit and has a variable cost of $.25. Using the negotiated approach, what is the price that should be negotiated between the two companies? a. $0.25 b. $0.60 c. Between $0.25 and $0.60 d. $0.44

Which of the following is considered a responsibility center? a. Investment b. Cost c. All of these choices are correct. d. Profit

Responsibility accounting reports for higher-level managers are ________________ lower-level managers. a. More detailed than b. The same as c. Not given to d. More summarized than

A manager in a profit center has responsibility for all of the following except: a. Fixed assets. b. Salaries expense. c. Materials. d. Revenues.

Which of the following is not an advantage of a decentralized operation? a. It provides training for managers. b. Managers focus in their area of responsibility. c. Each manager has his or her own sales force and administrative staff. d. It allows for better decision making.

Which of the following is the constraint under a negotiated price approach for establishing transfer prices? a. Transfer Price = Market Price b. Variable Costs per Unit = Transfer Price c. Variable Costs per Unit > Transfer Price > Market Price d. Variable Costs per Unit < Transfer Price < Market Price

Which of the following would not be considered a service department? a. Human resources department b. Accounting department c. Production department d. Facilities management department