Accounting Chapter 23 – Flashcards
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Which of the following would be most effective in a small owner/manager-operated business?
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Centralization
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Businesses that are separated into two or more manageable units in which managers have authority and responsibility for operations are said to be:
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Decentralized
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All of the following are advantages of decentralization except:
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Each decentralized operation purchases their own assets and pays for operating costs.
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Which of the following is a disadvantage of decentralization?
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Decisions made by one manager may negatively affect the profitability of the entire company
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Which of the following expenses incurred by the sporting goods department of a department store is a direct expense?
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Insurance on inventory of sporting goods
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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:
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Direct Expenses
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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:
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Total service department charges are $1,025,000
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The costs of services charged to a profit center on the basis of its use of those services are called:
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Service department charges.
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Division X reported income from operations of $975,000 and total service department charges of $575,000. Therefore:
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Income from operations before service department charges was $1,550,000
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Income from operations for Division Z is $250,000, total service department charges are $400,000 and operating expenses are $2,266,000. What are the revenues for Division Z?
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$2,916,000
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Income from operations for Division K is $220,000, and income from operations before service department charges is $975,000. Therefore:
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Total service department charges are $755,000
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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 income from operations before service department charges, it follows that
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Division A's manager is given the bonus.
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Managers of what type of decentralized units have authority and responsibility for revenues, costs, and assets invested in the unit?
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Investment Center
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A responsibility center in which the department manager is responsible for costs, revenues, and assets for a department is called
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Investment Center
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In an investment center, the manager has the responsibility for and the authority to make decisions that affect:
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Not only costs and revenues, but also assets invested in the center
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In an investment center, the manager has responsibility and authority for making decisions that affect:
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Costs, revenues, and assets.
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Identify the formula for the rate of return on investment.
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Income From Operations/Invested Assets
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The excess of divisional income from operations over a minimum amount of divisional income from operations is termed:
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Residual income
