1. In a decentralized organization, performance evaluation should encourage managers to behave as if their own personal goals were congruent with the goals of the company as a whole. True False 2. Return on investment can be improved by increasing income or reducing investment. True False 3. Transfer prices should represent the opportunity costs of the transferred item. True False 4. A cost center does not have responsibility for generating revenue. should be evaluated using return on investment. has a manager who is instrumental in setting prices for the product. has a set of performance measures that is more complex than those for an investment center. 5. If responsibility centers are ranked in order of decreasing responsibility, the ranking is investment centers, cost centers, profit centers. cost centers, investment centers, profit centers. profit centers, cost centers, investment centers. investment centers, profit centers, cost centers. 6. Return on investment can be improved by increasing the profit margin. generating more sales for each dollar invested. Both A and B are correct. Neither A nor B is correct. 7. The following data pertains to the dress division of the Cross and Allan Company: Sales $1,000,000 Invested capital $700,000 Net operating profit after taxes $160,000 Minimum required return 15% Residual income/(loss) is equal to: $10,000 $24,000 $45,000 $55,000 8. Claremont Woolen Products has two divisions: a fabric division that manufactures woolen fabrics, and a clothing division that manufactures woolen dresses, coats, shirts, and accessories. All fabric used by the clothing division is supplied by the fabric division, which also supplies fabric to outside companies. What is the best transfer price for the fabric, assuming that the fabric division is operating at only 60 percent of capacity due to a surge in popularity of ?easy-care? fabrics made of polyester and rayon? An amount that equates to variable costs plus contribution margin. An amount that equates to the external selling price. An amount that equates to variable costs. An amount that equates to full product costs. 9. Croissant Division of Pastry Corporation has invested capital of $1,600,000. During the past year, Croissant had sales of $1,200,000 and earned $400,000. What is Croissant?s return on investment? 20% 25% 33% 300% 10. Wolf Food Company has two divisions, Scraps and Bones. Operating results for the two divisions are as follows: The required rate of return for the Wolf Food Company is 18%. What is the residual income for the Bones division? scraps bones NOPAT $50,000 $60,000 Investment $250,000 $400,000 $0 ($12,000) 12,000 10,800