question

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

answer

Centralization

question

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

answer

decentralized

question

Which of the following is NOT a disadvantage of decentralized operation?

answer

Top management freed from everyday tasks to do strategic planning

question

Which is the best example of a decentralized operation?

answer

Each unit is responsible for their own operations and decision making.

question

The following are advantages of decentralization except:

answer

Each decentralized operation purchases their own assets and pays for operating costs.

question

Which of the following is not one of the common types of responsibility centers?

answer

Revenue Center

question

Which of the following is a disadvantage of decentralization?

answer

Decisions made by one manager may negatively affect the profitability of the entire company.

question

A manager is responsible for costs only in a(n):

answer

cost center

question

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

answer

costs

question

For higher levels of management, responsibility accounting reports:

answer

are more summarized than for lower levels of management

question

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

answer

costs only.

question

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

answer

budget performance report

question

A responsibility center in which the department manager has responsibility for and authority over costs and revenues is called a(n):

answer

profit center

question

In a profit center, the department manager has responsibility for and the authority to make decisions that affect:

answer

both costs and revenues for the department or division

question

Which of the following expenses incurred by the sporting goods department of a department store is a direct expense?

answer

Insurance on inventory of sporting goods

question

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

answer

Salary of vice-president of finance

question

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

answer

costs

question

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:

answer

direct expenses

question

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

answer

to historical performance or budget

question

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

answer

service department charges

question

To calculate income from operations, total service department charges are:

answer

subtracted from income from operations before service department charges

question

What is the term used to describe expenses that are incurred for the benefit of a specific department?

answer

Direct expenses

question

Responsibility accounting reports for profit centers will include

answer

revenues, expenses, net income or loss from operations.

question

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?

answer

Inventory Control

question

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

answer

divisional income statements

question

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

answer

Manufacturing department

question

Managers of what type of decentralized units have authority and responsibility for revenues, costs, and assets invested in the unit?

answer

Investment center

question

A responsibility center in which the department manager is responsible for costs, revenues, and assets for a department is called:

answer

an investment center

question

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

answer

not only costs and revenues, but also assets invested in the center

question

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

answer

costs, revenues, and assets

question

The profit margin is the:

answer

ratio of income from operations to sales

question

The investment turnover is the:

answer

ratio of sales to invested assets

question

Identify the formula for the rate of return on investment.

answer

Income From Operations/Invested Assets

question

Which of the following expressions is termed the profit margin factor as used in determining the rate of return on investment?

answer

Income From Operations/Sales

question

Which of the following expressions is termed the investment turnover factor as used in determining the rate of return on investment?

answer

Sales/Invested Assets

question

What additional information is needed to find the rate of return on investment if income from operations is known?

answer

Invested assets

question

The best measure of managerial efficiency in the use of investments in assets is:

answer

investment turnover

question

The excess of divisional income from operations over a minimum amount of divisional income from operations is termed:

answer

residual income

question

Which one of the following is NOT a measure that management can use in evaluating and controlling investment center performance?

answer

Negotiated price

question

A factor in determining the rate of return on investment--the ratio of income from operations to sales--is called:

answer

profit margin

question

A factor in determining the rate of return on investment--the ratio of sales to invested assets--is called:

answer

investment turnover

question

Investment centers differ from profit centers in that they

answer

are able to invest in assets.

question

The balanced scorecard measures financial and nonfinancial performance of a business. The balanced scorecard measures four areas. Identify one of the following that is not included as a performance measurement.

answer

Employees

question

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

answer

A. budget performance report B. rate of return and residual income measures C. divisional income statements

question

The balanced scorecard measures

answer

both financial and nonfinancial information

question

Which of the following is not a commonly used approach to setting transfer prices?

answer

Revenue price approach

question

Determining the transfer price as the price at which the product or service transferred could be sold to outside buyers is known as the:

answer

Market price approach

question

When is it appropriate to use the market price approach when two related companies are providing services or products to each other?

answer

The purchasing company is currently purchasing a product at a price from an outside supplier as it would from its related company that is operating at full capacity.

question

Which transfer price approach is used when the transfer price is set at the amount sold to outside buyers?

answer

Market Price

question

The transfer price which is uses a variety of cost concepts is the

answer

Cost price approach

question

The transfer price that must be less than the market price but greater than the supplying division's variable costs per unit is called

answer

the negotiated cost approach

Accounting 2 – Chapter 24 – Test 3 – Review MC – Flashcards

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