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Exam 24: Evaluating Decentralized Operations

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Question 71

Multiple Choice

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In an investment center, the manager has the responsibility for and the authority to make decisions that affect

A) the assets invested in the center, but not costs and revenues
B) costs and assets invested in the center, but not revenues
C) both costs and revenues for the department or division
D) costs, revenues, and assets invested in the center

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

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Question 72

Multiple Choice

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Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, operating income amounting to $302,500, and a desired minimum return on investment of 15%.​ -The investment turnover for Chicks Corporation is

A) 1.3
B) 1.5
C) 1.0
D) 1.1

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

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Question 73

Multiple Choice

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Division A of Chacha Company has sales of $140,000, cost of goods sold of $83,000, operating expenses of $43,000, and invested assets of $150,000.​ -The return on investment (ROI) for Division A is

The following data are taken from the management accounting reports of Dulcimer Co.: If an incentive bonus is paid to the manager who achieved the highest operating income before support department allocations, it follows that

The costs of services charged to a profit center on the basis of its use of those services are

Which of the following expenses incurred by a department store would be a direct expense of the Sporting Goods Department?

Most manufacturing plants are considered cost centers because they have control over

Heart Company has two divisions. Division A is interested in purchasing 10,000 units from Division B. Capacity is available for Division B to produce these units. The per-unit market price is $30 per unit, with a variable cost of $25. The manager of Division A has offered to purchase the units at $22 per unit. In an effort to make this transfer price beneficial for the company as a whole, the range of prices that should be used during negotiations between the two divisions is

The sales, operating income, and invested assets for each division of Grosbeak Company are as follows: a.Using the DuPont formula, determine the profit margin, investment turnover, and return on investment for each division. Round profit margin percentage to two decimal places, investment turnover to four decimal places, and return on investment to one decimal place. b.Which division is the most profitable per dollar invested?

The return on investment may be computed by multiplying investment turnover by the profit margin.

Businesses that are separated into two or more manageable units in which managers have authority and responsibility for operations are said to be

Separation of businesses into more manageable operating units is termed decentralization.

Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, operating income amounting to $302,500, and a desired minimum return on investment of 15%.​ -The profit margin for Chicks Corporation is

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

Materials used by Square Yard Products Inc. in producing Division 3's product are currently purchased from outside suppliers at a cost of $5.00 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 $3.00 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.​ -Division 3's operating income will increase by

A franchisor may provide support to the franchisee in which of the following ways?

The Creative Division of Barry Company reported the following results for December: Based on this information, what were sales?

Ralston Company has operating income of $75,000, invested assets of $360,000, and sales of $790,000.​ Use the DuPont formula to compute the return on investment (ROI), and show (a) the profit margin, (b) the investment turnover, and (c) the return on investment. Round the profit margin percentage to two decimal places, the investment turnover to three decimal places, and the return on investment to two decimal places.

ABC Corporation has three support departments with the following costs and cost drivers: ABC has three operating divisions, Micro, Macro, and Super. Their revenue, cost, and activity information are as follows: ​ -The support department allocation rate for the Personnel Department is

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 profit margin for Mason Corporation is