Question 1

How do the responsibilities of a manager in an investment center compare to the responsibilities of managers in a cost or profit center?
A) Investment center managers have more authority and responsibility than managers of a cost or profit center.
B) Investment center managers have more authority and responsibility than managers of a cost center but less than managers of a profit center.
C) Investment center managers have about the same authority and responsibility as managers of a cost or profit center.
D) Investment center managers have more authority and responsibility than managers of a profit center but less than managers of a cost center.

Accepted Answer

Investment center managers have broader responsibilities, including decisions on investments and operations, making their role more encompassing than those of cost or profit center managers, who focus on cost control or profitability, respectively.

Question 2

In an investment center, the manager has the responsibility for and the authority to make decisions that affect:
A) the assets invested in the center but not costs and revenues.
B) costs and assets invested in the center but not revenues.
C) both costs and revenues for the department or division.
D) not only costs and revenues but also assets invested in the center.

Accepted Answer

In an investment center, the manager has responsibility for and authority over all aspects of the center, including costs, revenues, and assets invested in the center. Therefore, choice D is correct. Choices A and B are incorrect because they only partially describe the manager's responsibilities and authority. Choice C is incorrect because it only includes costs and revenues but not assets invested in the center.

Question 3

Responsibility accounting reports for profit centers will include:
A) only costs.
B) only revenues.
C) both expenses and fixed assets.
D) revenues, expenses, and net income or loss from operations.

Accepted Answer

Responsibility accounting reports for profit centers will include both revenues and expenses, as well as the resulting net income or loss from operations. This information is necessary for managers and decision-makers to evaluate the performance of the profit center and make informed decisions regarding its operations. Including only costs or revenues would not provide a complete picture of the profit center's financial performance. Fixed assets may also be included, but are not typically a primary focus in profit center reporting.

Question 4

The following financial information was summarized from the accounting records of Block Corporation for the current year ended December 31:  The net income for Block Corporation is:
A) $68,200.
B) $44,700.
C) $54,700.
D) $54,900.

Accepted Answer

The net income is calculated by subtracting the total expenses ($148,300) from the total revenues ($203,000), which results in a net income of $54,700.

Question 5

The following financial information was summarized from the accounting records of Block Corporation for the current year ended December 31:  The gross profit for the Hardware Division is:
A) $103,000.
B) $229,800.
C) $176,400.
D) $76,200.

Accepted Answer

The gross profit can be calculated as follows:
Revenue for Hardware Division: $544,000
Cost of goods sold for Hardware Division: $367,600
Gross profit for Hardware Division: $544,000 - $367,600 = $176,400.

Question 6

Some organizations use internal service departments to provide services to several divisions or departments within an organization. Which of the following would probably not lend itself as a service department?
A) Inventory Control
B) Payroll Accounting
C) Information Systems
D) Human Resources

Accepted Answer

Inventory Control is a department that typically serves a single division or department within an organization, rather than providing services to multiple divisions or departments. The other options (Payroll Accounting, Information Systems, and Human Resources) are commonly used as service departments.

Question 7

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 residual income for Blancher is:
A) $24,750.
B) $17,820.
C) $14,850.
D) $16,500.

Accepted Answer

Residual income = Income from operations - (Desired rate of return * Invested assets)= $99,000 - (15% * $495,000)= $99,000 - $74,250= $24,750

Question 8

Blancher Corporation had $495,000 invested in assets, sales of $660,000, income from operations amounting to $99,000, and a desired minimum rate of return of 15%. The rate of return on investment for Blancher is:
A) 16%.
B) 20%.
C) 18%.
D) 15%.

Accepted Answer

The rate of return on investment (ROI) is calculated as (Income from Operations / Invested Assets) * 100. For Blancher, it is ($99,000 / $495,000) * 100 = 20%.

Question 9

Income from operations for Division B is $150,000, total service department charges are $400,000, and operating expenses are $2,266,000. What are the revenues for Division B?
A) $2,416,000
B) $2,016,000
C) $2,666,000
D) $2,816,000

Accepted Answer

The answer of Income from operations for Division B is...

Question 10

The following data are taken from the management accounting reports of Dancer Co.: $\begin{array}{llll}
\underline{\text { Div. C }}&\underline{ \text { Div. B }} &\underline{ \text { Div. A} } & \
2,700,000 & \$ 3,700,000 & \$ 3,600,000 & \text { Income from operations } \
2,200,000 & 2,100,000 & 3,400,000 & \text { Total service department charges }
\end{array}$ If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that:
A) division A's manager is given the bonus.
B) division B's manager is given the bonus.
C) division C's manager is given the bonus.
D) the managers of Divisions B and C divide the bonus.

Accepted Answer

The answer of The following data are taken from the...

Question 11

The following data are taken from the management accounting reports of Dancer Co.: $\begin{array}{llll}
\underline{\text { Div. C }}&\underline{ \text { Div. B }} &\underline{ \text { Div. A} } & \
1,900,000 & \$1,350,000 & \$1,800,000 & \text { Income from operations } \
1,100,000 & 1,050,000 & 1,700,000 & \text { Total service department charges }
\end{array}$ If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that
A) division A's manager is given the bonus.
B) division B's manager is given the bonus.
C) division C's manager is given the bonus.
D) the managers of Divisions B and C divide the bonus.

Accepted Answer

The answer of The following data are taken from the...

Question 12

The following financial information was summarized from the accounting records of Block Corporation for the current year ended December 31:  The income from operations for the Hardware Division is:
A) $103,000.
B) $76,200.
C) $166,400.
D) $66,200.

Accepted Answer

The income from operations for the Hardware Division can be calculated as follows:
Sales revenue - Cost of goods sold - Operating expenses = Income from operations
$420,000 - $266,800 - $77,000 = $76,200
Therefore, the correct answer is B.

Question 13

Espinosa Corporation had $220,000 invested in assets, sales of $242,000, income from operations amounting to $48,400, and a desired minimum rate of return of 3%. The rate of return on investment for Espinosa is:
A) 20%.
B) 22%.
C) 3%.
D) 6.4%.

Accepted Answer

The answer of Espinosa Corporation had $220,000 invested in assets,...

Question 14

Division T reported income from operations of $900,000 and total service department charges of $575,000. Therefore,:
A) net income was $325,000.
B) the gross profit margin was $325,000.
C) income from operations before service department charges was $1,475,000.
D) consolidated net income was $325,000.

Accepted Answer

Income from operations before service department charges can be calculated by adding service department charges to income from operations. Therefore, income from operations before service department charges was $1,475,000 ($900,000 + $575,000). None of the other answer choices are correct based on the information given.

Question 15

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 Blancher is:
A) 1.20.
B) 1.00.
C) 1.10.
D) 1.33.

Accepted Answer

Investment turnover = Sales / Invested assets

Investment turnover = $660,000 / $495,000 = 1.33

Since the minimum desired rate of return is not given, we cannot calculate whether Blancher Corporation met the target or not.

Question 16

Which of the following would not be considered as an internal centralized service department?
A) Payroll accounting department
B) Manufacturing department
C) Information systems department
D) Purchasing department

Accepted Answer

Manufacturing department is a primary operational department responsible for creating the product or service offered by the company. Internal centralized service departments provide support and services to primary departments. Therefore, manufacturing department cannot be considered as an internal centralized service department. The other options - Payroll accounting department, Information systems department, and Purchasing department - are examples of internal centralized service departments.

Question 17

Income from operations for Division M is $150,000, and income from operations before service department charges is $975,000. Therefore,:
A) total operating expenses are $825,000.
B) total manufacturing expenses are $825,000.
C) direct materials, direct labor, and factory overhead total $825,000.
D) total service department charges are $825,000.

Accepted Answer

The answer of Income from operations for Division M is...

Question 18

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 profit margin for Blancher is:
A) 16%.
B) 20%.
C) 18%.
D) 15%.

Accepted Answer

The answer of Blancher Corporation had $495,000 in invested assets,...

Question 19

Which of the following is used to measure a manager's performance working in a profit center?
A) Balance sheet
B) Rate of return and residual income
C) Budget performance report
D) Divisional income statements

Accepted Answer

The answer of Which of the following is used to...

Question 20

The profit margin for Division E is 28% and the investment turnover is 3.0. What is the rate of return on investment for Division E?
A) 84%
B) 28%
C) 14%
D) 9%

Accepted Answer

The answer of The profit margin for Division E is...

Quiz 14: Performance Evaluation for Decentralized Operations

How do the responsibilities of a manager in an investment center compare to the responsibilities of managers in a cost or profit center?

In an investment center, the manager has the responsibility for and the authority to make decisions that affect:

Responsibility accounting reports for profit centers will include:

The following financial information was summarized from the accounting records of Block Corporation for the current year ended December 31: The net income for Block Corporation is:

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

Some organizations use internal service departments to provide services to several divisions or departments within an organization. Which of the following would probably not lend itself as a service department?

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 residual income for Blancher is:

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

Income from operations for Division B is $150,000, total service department charges are $400,000, and operating expenses are $2,266,000. What are the revenues for Division B?

The following financial information was summarized from the accounting records of Block Corporation for the current year ended December 31: The income from operations for the Hardware Division is:

Espinosa Corporation had $220,000 invested in assets, sales of $242,000, income from operations amounting to $48,400, and a desired minimum rate of return of 3%. The rate of return on investment for Espinosa is:

Division T reported income from operations of $900,000 and total service department charges of $575,000. Therefore,:

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 Blancher is:

Which of the following would not be considered as an internal centralized service department?

Income from operations for Division M is $150,000, and income from operations before service department charges is $975,000. Therefore,:

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 profit margin for Blancher is:

Which of the following is used to measure a manager's performance working in a profit center?

The profit margin for Division E is 28% and the investment turnover is 3.0. What is the rate of return on investment for Division E?