Question 1

Which of the following would be a reason why managers would NOT provide good service?

Accepted Answer

A)   They may have low ability.
B)   They may not prefer to work hard.
C)   They may prefer to spend company resources on perquisites.
D)   All of these are reasons.E) All of the above
F) A) and B)

Question 2

A manufacturing division of a company would most likely be evaluated as a(n)

Accepted Answer

A)   cost center.
B)   investment center.
C)   revenue center.
D)   asset center.E) A) and D)
F) B) and C)

Question 3

In centralized organizations, lower-level managers are responsible only for implementing decisions.

Accepted Answer

A) True 
 B)False

Question 4

The Hampton Division of Long Island Company sells all of its output to the Finishing Division of the company. The only product of the Hampton Division is chair legs that are used by the Finishing Division. The retail price of the legs is $20 per leg. Each chair completed by the Finishing Division requires four legs. Production quantity and cost data for 2016 are as follows:
  
a. market price.
b. variable product costs plus a fixed fee of 20 percent.
c. full cost plus 20 percent markup.
d. variable costs.
e. full cost plus 10 percent markup.

Accepted Answer

a. $20
b. 1.20 × [$135,000 + $90,000 + (...

Question 5

EVA encourages the right kind of behavior from divisions because of its emphasis on

Accepted Answer

A)   after-tax net income.
B)   total capital employed.
C)   true cost of capital.
D)   before-tax operating income.E) B) and C)
F) All of the above

Question 6

The following information pertains to the three divisions of Merrymount Company:  What is the residual income for Division X?

Accepted Answer

A)   $36,000
B)   $45,000
C)   $(9,000) 
D)   $(36,000) E) A) and B)
F) B) and C)

Question 7

Transfer prices are the prices charged

Accepted Answer

A)   for distributing goods from one warehouse to another.
B)   for the goods produced by one division to another division that needs these goods.
C)   when delivering goods to the customer.
D)   when transferring goods to international divisions.E) A) and D)
F) A) and C)

Question 8

If the operating asset turnover increased by 50 percent and the margin increased by 50 percent, the ROI would increase by

Accepted Answer

A)   50 percent.
B)   25 percent.
C)   100 percent.
D)   125 percent.E) B) and C)
F) A) and C)

Question 9

The following information pertains to the three divisions of Merrymount Company:  What are the average operating assets for Division Y?

Accepted Answer

A)   $25,000
B)   $208,333
C)   $5,000
D)   $125,000E) None of the above
F) B) and C)

Question 10

Return on investment (ROI) refers to earnings before interest and income taxes.

Accepted Answer

A) True 
 B)False

Question 11

Epsilon Division had the following information:  If the asset base is decreased by $100,000, with no other changes, the return on investment of Epsilon Division will
Be

Accepted Answer

A)   100.0%.
B)   600.0%.
C)   16.7%.
D)   62.5%.E) A) and C)
F) B) and C)

Question 12

The following information pertains to the three divisions of Merrymount Company:  What are the sales for Division Y?

Accepted Answer

A)   $500,000
B)   $125,000
C)   $208,333
D)   $25,000E) A) and B)
F) All of the above

Question 13

Which of the following is NOT a disadvantage of the ROI performance measure?

Accepted Answer

A)   It encourages managers to focus on the long run rather than the short run.
B)   It discourages managers from investing in projects that would decrease divisional ROI but increase the profitability of the company as a whole.
C)   It encourages myopic behavior.
D)   All are disadvantages of the ROI measure.E) All of the above
F) A) and B)

Question 14

Goal congruence can be defined as

Accepted Answer

A)   an incentive plan arranged so the managers' goals are aligned with the shareholders' goals.
B)   managers operating the business in the best interest of the shareholders.
C)   tying management rewards to shareholder results.
D)   all of these are correct.E) None of the above
F) A) and B)

Exam 10: Decentralization: Responsibility, Accounting, Performance Evaluation, and Transfer Pricing

Epsilon Division had the following information: If the asset base is decreased by $100,000, with no other changes, the return on investment of Epsilon Division will Be

Correct Answer
verified

Return on investment (ROI) refers to earnings before interest and income taxes.

Correct Answer
verified

The following information pertains to the three divisions of Merrymount Company: What are the average operating assets for Division Y?

Correct Answer
verified

Goal congruence can be defined as

Correct Answer
verified

A manufacturing division of a company would most likely be evaluated as a(n)

Correct Answer
verified

Which of the following is NOT a disadvantage of the ROI performance measure?

Correct Answer
verified

Correct Answer
verified
a. $20
b. 1.20 × [$135,000 + $90,000 + (...
View Answer

In centralized organizations, lower-level managers are responsible only for implementing decisions.

Correct Answer
verified

The following information pertains to the three divisions of Merrymount Company: What is the residual income for Division X?

Correct Answer
verified

EVA encourages the right kind of behavior from divisions because of its emphasis on

Correct Answer
verified

If the operating asset turnover increased by 50 percent and the margin increased by 50 percent, the ROI would increase by

Correct Answer
verified

Which of the following would be a reason why managers would NOT provide good service?

Correct Answer
verified

The following information pertains to the three divisions of Merrymount Company: What are the sales for Division Y?

Correct Answer
verified

Transfer prices are the prices charged

Correct Answer
verified

Exam 10: Decentralization: Responsibility, Accounting, Performance Evaluation, and Transfer Pricing

Epsilon Division had the following information: If the asset base is decreased by $100,000, with no other changes, the return on investment of Epsilon Division will Be

Correct AnswerverifiedShow Answer

Return on investment (ROI) refers to earnings before interest and income taxes.

Correct AnswerverifiedShow Answer

The following information pertains to the three divisions of Merrymount Company: What are the average operating assets for Division Y?

Correct AnswerverifiedShow Answer

Goal congruence can be defined as

Correct AnswerverifiedShow Answer

A manufacturing division of a company would most likely be evaluated as a(n)

Correct AnswerverifiedShow Answer

Which of the following is NOT a disadvantage of the ROI performance measure?

Correct AnswerverifiedShow Answer

Correct Answerverifieda. $20b. 1.20 × [$135,000 + $90,000 + (...View AnswerShow Answer

In centralized organizations, lower-level managers are responsible only for implementing decisions.

Correct AnswerverifiedShow Answer

The following information pertains to the three divisions of Merrymount Company: What is the residual income for Division X?

Correct AnswerverifiedShow Answer

EVA encourages the right kind of behavior from divisions because of its emphasis on

Correct AnswerverifiedShow Answer

If the operating asset turnover increased by 50 percent and the margin increased by 50 percent, the ROI would increase by

Correct AnswerverifiedShow Answer

Which of the following would be a reason why managers would NOT provide good service?

Correct AnswerverifiedShow Answer

The following information pertains to the three divisions of Merrymount Company: What are the sales for Division Y?

Correct AnswerverifiedShow Answer

Transfer prices are the prices charged

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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a. $20
b. 1.20 × [$135,000 + $90,000 + (...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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