1. What is meant by the term decentralization?
2. What benefits result from decentralization?
3. Distinguish between a cost center, a profit center, and an investment center.
4. What is meant by the terms margin and turnover in ROI calculations?
5. What is meant by residual income?
6. In what way can the use of ROI as a performance measure for investment centers lead to bad decisions? How does the residual income approach overcome this problem?
7. What is a transfer price?
8. What does suboptimization mean?
9. Why should a service department's budgeted costs, rather than its actual costs, be charged to operating departments?
10. Why is using sales dollars as an allocation base usually a poor choice for allocating fixed costs to operating departments?