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Exam 23: Performance Evaluation for Decentralized Operations

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Question 91

Multiple Choice

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What is the profit margin?

A) 33.3%
B) 5.2%
C) 16.0%
D) 19.1%

E) A) and D)
F) None of the above

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Question 92

Multiple Choice

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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 are as follows: $\begin{array} { | l | l | l | l | } \hline & \text { Micro } & \text { Macro } & \text { Super } \\\hline \text { Direct revenues } & \$ 700,000 & \$ 850,000 & \$ 650,000 \\\hline \text { Direct operating expenses } & 50,000 & 70,000 & 100,000 \\\hline \text { Number of copies made } & 20,000 & 30,000 & 50,000 \\\hline \text { Number of invoices processed } & 700 & 800 & 500 \\\hline \text { Number of employees } & 130 & 145 & 125 \\\hline\end{array}$ -What is the service department charge rate for Graphics Production?

A) $2.00
B) $10.00
C) $6.66
D) $0.50

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

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Question 93

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The rates at which centralized services are charged to each division are called service department charge rates.

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, what is the range of prices that should be used during negotiations between the two divisions?

How much will Jefferson's total income from operations increase?

Match each definition that follows with the term a-e) it defines. -Ratio of sales to invested assets

Developing and retaining quality managers are advantages of decentralization.

Which of the following is a measure of a cost center manager's performance?

A decentralized business organization is one in which all major planning and operating decisions are made by top management.

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 advertising campaigns

The profit margin is the

Match each of the following phrases as describing a) an advantage, b) a disadvantage, or c) neither of decentralization. -Operational issues are made by managers closest to the operations

Division A reported income from operations of $975,000 and total service department charges of $675,000. As a result,

Marshall Corporation had $220,000 in invested assets, sales of $242,000, income from operations of $66,000, and a desired minimum rate of return of 3%. The rate of return on investment for Marshall is

Responsibility accounting reports for profit centers will include

Which of the following expenses incurred by a department store is an indirect expense?

Investment turnover as used in determining the rate of return on investment) focuses on the rate of profit earned on each sales dollar.

Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are termed direct operating expenses.

How much will Division C's income from operations increase?

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