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Exam 24: Performance Evaluation for Decentralized Operations

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Question 61

Multiple Choice

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Division X reported income from operations of $975,000 and total service department charges of $575,000. Therefore:

A) net income was $400,000
B) the gross profit margin was $400,000
C) income from operations before service department charges was $1,550,000
D) consolidated net income was $400,000

E) B) and C)
F) All of the above

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Question 62

Multiple Choice

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Which of the following is a disadvantage of decentralization?

A) Decisions made by one manager may negatively affect the profitability of the entire company.
B) Helps retain quality managers.
C) Decision making by managers closest to the operations.
D) Managers are able to acquire expertise in their areas of responsibility.

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

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Question 63

Multiple Choice

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All of the following are advantages of decentralization except:

Materials used by Best Bread Company in producing Division A's product are currently purchased from outside suppliers at a cost of $30 per unit. However, the same materials are available from Division B. Division B has unused capacity and can produce the materials needed by Division A at a variable cost of $20 per unit.

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

The investment turnover is the:

In a cost center, the manager has responsibility and authority for making decisions that affect:

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

For higher levels of management, responsibility accounting reports:

The sales, income from operations, and invested assets for each division of Grosbeak Company are as follows:

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

Which of the following would not be considered an internal centralized service department?

The profit center income statement should include only revenues and expenses that are controlled by the manager.

Office salaries expense for a department store is an indirect expense.

The following is a measure of a manager's performance working in an investment center.

The balanced scorecard is a set of financial and nonfinancial measures that reflect the performance of the business.

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31: The income from operations for the Rails Division is:

Materials used by Square Yard Products Inc. in producing Division 3's product are currently purchased from outside suppliers at a cost of $5 per unit. However, the same materials are available from Division 6. Division 6 has unused capacity and can produce the materials needed by Division 3 at a variable cost of $3 per unit. A transfer price of $3.20 per unit is established, and 40,000 units of material are transferred, with no reduction in Division 6's current sales. How much would Division 6's income from operations increase?

The following is a measure of a manager's performance working in a profit center.

The primary disadvantage of decentralized operations is that decisions made by one manager may affect other managers in such a way that the profitability of the entire company may suffer.