Question 1 of 15

1.34 Points

A cost center is an organizational segment in which the manager is responsible for costs and revenues, but not investments in assets.

A.TrueB.False

Question 2 of 15

1.34 Points

Return on investment (ROI) can be calculated several different ways depending on the company.

A.TrueB.False

Question 3 of 15

1.34 Points

When residual income is used to evaluate division managers, the goal for each division man-ager is to increase residual income over time.

A.TrueB.False

Question 4 of 15

1.34 Points

An organizational segment that is responsible for costs and revenues is known as:

A.a financing center.B.a profit center.C.a cost center.D.an investment center.E.None of the answer choices is correct.

Question 5 of 15

1.34 Points

Average operating assets are calculated by adding the beginning balance of operating assets from Period 1 to the ending balance of operating assets from Period 1 and multiplying by two.

A.TrueB.False

Question 6 of 15

1.33 Points

Although economic value added (EVA) is similar to residual income, adjustments are made to the financial information to better reflect the economic results of the division.

A.TrueB.False

Question 7 of 15

1.33 Points

The term decentralized organization refers to an organization that delegates decision-making and operational responsibilities to managers of each segment of the organization.

A.TrueB.False

Question 8 of 15

1.33 Points

The cost-plus approach is the best approach for establishing transfer prices for all companies.

A.TrueB.False

Question 9 of 15

1.33 Points

All of the following are false about transfer pricing except:

A.using negotiated transfer pricing is always the best approach.B.the cost approach can base the transfer price on either the variable cost or full absorption cost.C.using the cost approach is always the best approach.D.companies should always use the selling division's variable cost as the transfer price.E.None of the answer choices is correct.

Question 10 of 15

1.33 Points

Residual income is the dollar amount of division operating profit in excess of the divisions cost of acquiring capital to purchase operating assets.

A.TrueB.False

Question 11 of 15

1.33 Points

Which of the following statements is true regarding the use of the operating profit margin as a performance measure?

A.It includes the assets that produced the income.B.It ignores the assets that produced the income.C.It is calculated as net income divided by sales.D.It is calculated as sales divided by operating income.E.None of the answer choices is correct.

Question 12 of 15

1.33 Points

Dillon requires a minimum return on its investments of 25%. Dillon Company has the following information available for one of its divisions: Average operating assets $4,000,000 Sales $4,800,000 Return on investment (ROI) 30% Based on this information, what is the division's asset turnover (rounded to two decimal places)?

A.2.78B.0.83C.4.00D.1.20E.None of the answer choices is correct.

Question 13 of 15

1.33 Points

Petra Company has the following information available for one of its divisions: Average operating assets $2,500,000 Sales $4,000,000 Return on investment (ROI) 40% If Petras cost of capital is 25%, what is the divisions residual income?

A.$1,500,000B.$1,000,000C.$375,000D.$975,000E.None of the answer choices is correct.

Question 14 of 15

1.33 Points

If decisions within a company are made by top management at headquarters, which of the following terms best describes this company?

A.cost center.B.decentralized organization.C.centralized organization.D.investment center.E.None of the answer choices is correct.

Question 15 of 15

1.33 Points

Most organizations use only residual income for performance measurement because of the weaknesses associated with using return on investment (ROI).

A.TrueB.False