Costs that would not be incurred if the segment were discontinued are called:

A. Avoidable common costs

B. Indirect segment costs

C. Variable segment costs

D. Both A and C

When an outside market exists for an intermediate product that is perfectly competitive, the ideal method of transfer pricing is generally

A. one that is higher than what the outside market is quoting.

B. the one that creates the highest margin to the selling unit.

C. the price at which the product sells in the external market.

D. based on management accounting numbers.

Residual income is

A. income beyond the breakeven point determined by the product's lifecycle.

B. a percentage of income received by an organization for its participation in a joint venture.

C. the excess of investment center income over the minimum return set by management.

D. excess income earned after budgeted income has been achieved.

Falcon Company had sales of $2,400,000, net income of $400,000, and an asset base of $600,000. Its investment turnover is:

A. 4.00

B. 0.25

C. 2.50

D. 3.30

Information for Tube division is as follows:

Net earnings for division $20,000

Asset base for division $50,000

Target rate of return 16%

Operating income margin 12%

Weighted average cost of capital 8%

What is Tube's residual income?

A. $16,000

B. $ 8,000

C. $13,000

D. $12,000

Which of the following processes involve the development of capital budgeting project performance reports that compare planned to actual results?

A. Annual reviews

B. Financials statement audits

C. Compliance audits

D. Post-audit reviews

Clarinet Publishing is considering the purchase of a used printing press costing $40,000. The printing press would generate a net cash inflow of $10,000 a year for 10 years. At the end of 10 years, the press would have no salvage value. The company's cost of capital is 10 percent. The company uses straight-line depreciation.

The project's accounting rate of return on the initial investment is:

A. 19 percent

B. 15 percent

C. 32 percent

D. 75 percent

This capital budgeting models assumes all net cash inflows are reinvested at the discount rate.

A. Internal rate of return

B. Payback period

C. Accounting rate of return

D. Net present value

The depreciation tax shield is

A. a reduction in taxes in the year a new asset is placed in service.

B. the reduction in taxes due to the deductibility of depreciation from taxable revenues.

C. computed as [(one minus the tax rate) times depreciation].

D. the increase in taxes due the addition of depreciation to operating income in computing operating cash flows.

When an outside market exists for an intermediate product that is perfectly competitive, the ideal method of transfer pricing is generally

	A.	one that is higher than what the outside market is quoting.
	B.	the one that creates the highest margin to the selling unit.
	C.	the price at which the product sells in the external market.
	D.	based on management accounting numbers.