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Exam 14: Performance Evaluation for Decentralized Operations

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Question 51

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The sales,income from operations,and invested assets for each division of Garner Company are as follows:

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ROI = Profit Margin Investm...

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Question 52

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The manager of a profit center does NOT make decisions concerning the fixed assets invested in the center.

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Question 53

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Identify the formula for the rate of return on investment.

Controllable expenses are those that can be influenced by the decisions of the profit center management.

Assume that Division X has generated sales revenue of $3,025,000 and achieved income from operations of $242,000 using $1,800,000 of invested assets.If management desires a minimum rate of return of 12%,the residual income is

Under the negotiated price approach,the transfer price is the price at which the product or service transferred could be sold to outside buyers.

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

Division Q for Mott Company has a rate of return on investment of 28% and an investment turnover of 1.4.What is the profit margin?

Purchase requisitions for Purchasing and the number of payroll checks for Payroll Accounting are examples of activity bases.

How much would Boone's total income from operations increase?

It is beneficial for two related companies to use the cost price approach for transfer pricing when both of the companies operate as cost centers and are not concerned with the revenue.

The balanced scorecard evaluates managers on financial and nonfinancial measures of performance.

The negotiated price approach allows the managers of decentralized units to agree among themselves as to the transfer price.

Investment turnover (as used in determining the rate of return on investment)focuses on the rate of profit earned on each sales dollar.

Blancher Corporation had $495,000 in invested assets,sales of $660,000,income from operations amounting to $99,000,and a desired minimum rate of return of 15%.The investment turnover for Stevenson is

The underlying principle of allocating operating expenses to departments is to assign to each department an amount of expense proportional to the revenues of that department.

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

How much would Division 3's income from operations increase?

A portion of the divisional income statement for the year just ended is presented below in condensed form. The operating expenses of Department F include $16,000 for direct expenses. It is estimated that the discontinuance of Department F would not have affected the sales of the other departments nor have reduced the indirect expenses of the business.Assuming the accuracy of these estimates,determine the effect (increase or decrease and amount)on the income from operations of the business if Department F had been discontinued.

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