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Exam 23: Decentralized Operations

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Question 1

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Which of the following would be most effective in a small owner-manager-operated business?

A) profit centers
B) centralization
C) investment centers
D) cost centers

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

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Question 2

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An activity base is used to charge service department expenses. Match each of the following activity bases with the appropriate department (a-h) . -Number of purchase requisitions

A) Purchasing
B) Payroll Accounting
C) Human Resources
D) Maintenance
E) Information Systems
F) Marketing
G) President's Office
H) Transportation

I) C) and H)
J) E) and G)

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Question 3

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Some organizations use internal service departments to provide like services to several divisions or departments within an organization. Which of the following would probably not lend itself as a service department?

Investment centers differ from profit centers in that they

The major advantage of residual income as a performance measure is that it gives consideration to not only a minimum return on investment but also the total magnitude of income from operations earned by each division.

The minimum accepted divisional income from operations is set by top management by establishing a maximum return considered acceptable for invested assets.

Match each of the following phrases as describing (a) an advantage, (b) a disadvantage, or (c) neither of decentralization. -Separate office staff

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

Use this information for ABC Corporation to answer the questions that follow. ​ ABC Corporation has three service departments with the following costs and activity base: ​ ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information is as follows: ​ -The profit margin for Mason is

An activity base is used to charge service department expenses. Match each of the following activity bases with the appropriate department (a-h) . -Number of computers in department

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

The manager of a profit center does not make decisions concerning the fixed assets invested in the center.

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

Use this information for ABC Corporation to answer the questions that follow. ​ ABC Corporation has three service departments with the following costs and activity base: ​ ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information is as follows: ​ -What is Clydesdale Company's profit margin?

What is the investment turnover for International Boot Company?

Which of the following is a disadvantage of decentralization?

Paduka Industries has several divisions. The Eastern Division has $350,000 of invested assets, income from operations of $200,000, and residual income of $151,000. Determine the minimum acceptable return on divisional assets.

What is the profit margin for Division A?

The Southern Division of Knucklehead Company has a return on investment of 15% and an investment turnover of 1.2. What is the profit margin?

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