FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 9: Responsibility Accounting

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 61

Multiple Choice

Review LaterAdd Note

Review Later

The process of evaluating the performance of individual managers is known as:

A) Responsibility accounting.
B) Management by exception.
C) Responsibility management.
D) Performance management.

E) All of the above
F) B) and C)

Correct Answer

verified

Show Answer

Question 62

True/False

Review LaterAdd Note

Review Later

The general formula for return on investment is revenue divided by investment in assets.

A) True
B) False

Correct Answer

verified

Show Answer

Question 63

True/False

Review LaterAdd Note

In a decentralized firm, a responsibility report should be prepared for investment center managers, but are not useful for profit center managers.

Retail Sales and Wholesale Sales are the only divisions of Terra Company. The following information was gathered for the two divisions for the current year: The company has $1,200,000 in operating assets that are not assigned to either of the divisions and $500,000 in corporate expenses that are not reflected in the information above. Based on this information, what is the ROI for the company as a whole? $\begin{array} { | l | l | l r | } \hline & { \text { Retail Division } } & { \text { Wholesale Division } } \\\hline \text { Operating income } & \$ 2,500,000 & \$ 6,000,000 \\\hline \text { Operating assets } & \$ 16,000,000 & \$ 36,000,000 \\\hline\end{array}$

Which of the following should not be included in the investment base used to compute residual income?

Terra Company has two divisions, the Retail Division and the Wholesale Division. The following information was gathered for the two divisions for the current year: Terra Company has set a target return on investment (ROI) of 15% for both divisions. Based on ROI, which division appears to have performed better? $\begin{array} { | l | l | l r | } \hline & { \text { Retail Division } } & { \text { Wholesale Division } } \\\hline \text { Operating income } & \$ 2,500,000 & \$ 6,000,000 \\\hline \text { Operating assets } & \$ 16,000,000 & \$ 36,000,000 \\\hline\end{array}$

How might return on investment be used in making resource allocation decisions within an organization?

Suboptimization refers to actions taken by a manager that are in the best interest of the firm as a whole but not in his/her own best interest.

A cost-based transfer price should be based on standard unit costs, not actual costs.

Mitchell Company has two divisions, Division A and Division B. Division A makes a product that Division B could use in making one of its products. Why do the managers of both divisions care about the amount of the transfer price?

In the current year, the New Products Division of Testar Company had operating income of $8,000,000 and operating assets of $44,800,000. Testar has set a target return on investment (ROI) of 16% for each of its divisions. Which of the following statements is correct?

Describe some of the factors and issues that must be considered in defining return and investment in calculating return on investment.

Frank and Brooke manage separate departments at Vantage Corporation. Frank's department is in charge of production of products, while Brooke's is responsible for sales of products. One of the company's objectives is to minimize its investment in inventory. Whose set of responsibility reports should include the cost of storing goods awaiting sale?

Which of the following statements regarding cost centers is incorrect?

Which of the following formats is typically used in year-to-date income statements prepared for internal use under a responsibility accounting system?

Car City is divided into three divisions: new car sales (NCS), used car sales (UCS), and parts and service (PAS). Each division is supervised by a division manager. The three division managers report to the general manager. Each division is subdivided into different departments managed by a department manager. For example, the PAS division has a parts department manager and a service department manager and NCS has a department manager for auto sales and a department manager for truck sales. The following items were contained in the company's most recent responsibility report: Required: Identify the items that are likely considered to be controllable by the Parts and Service division.

Which of the following is not a characteristic of an effective responsibility accounting system?

Management recently instituted a new training program for upper level managers. They budgeted the cost of the new program at $1,000 per employee trained but actual costs were $1,250 per employee trained. The difference between the budgeted cost for training and the actual cost of training is called a:

In a responsibility report, a cost center's actual costs should be compared to its flexible budget.

Terra Company has two divisions, the Retail Division and the Wholesale Division. The following information was gathered for the two divisions for the current year: Terra Company has set a target return on investment (ROI) of 15% for both divisions Which of the following statements is accurate? $\begin{array} { | l | l | l r | } \hline & { \text { Retail Division } } & { \text { Wholesale Division } } \\\hline \text { Operating income } & \$ 2,500,000 & \$ 6,000,000 \\\hline \text { Operating assets } & \$ 16,000,000 & \$ 36,000,000 \\\hline\end{array}$