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Exam 23: Performance Evaluation for Decentralized Operations

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Question 21

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The sales, income from operations, invested assets, and residual income for each division of Marcus Company are as follows: Determine the minimum rate of return for invested assets.

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Division X: $645,000 - $4,100,...

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Question 22

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A manager in a cost center also has responsibility and authority over the revenues.

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Question 23

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

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

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

If income from operations for a division is $5,000, invested assets are $25,000, and sales are $30,000, the profit margin is 20%.

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

Service department charges are similar to the expenses of a profit center that purchased services from a source outside the company.

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31: -The gross profit for the Rails Division is

What is Clydesdale Company's investment turnover?

Which of the following is a disadvantage of decentralization?

The primary accounting tool for controlling and reporting for cost centers is a budget.

How much will Division 6's income from operations increase?

Miller's Quarter Horse Company has sales of $4,500,000. It also has invested assets of $2,500,000 and operating expenses of $3,800,000. The company has established a minimum rate of return of 7%. a) What is Miller's profit margin? b) What is the investment turnover? c) What is the rate of return on investment? d) What is Miller's residual income?

What is the profit margin for Division D?

The DuPont formula uses financial and nonfinancial information to measure the performance of a business.

What is Clydesdale Company's residual income?

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 will the income of the Super Division be after all service department allocations?

4. What is the profit margin?

The profit center income statement should include only revenues and expenses that are controlled by the manager.