FINANCE

1. If income from operations for a division is $6,000, invested assets are $25,000, and sales are $30,000, the investment turnover is 1.2.

True

False

2 points   

QUESTION 2

1. Purchase requisitions for Purchasing and the number of payroll checks for Payroll Accounting are examples of activity bases.

True

False

2 points   

QUESTION 3

1. The DuPont formula uses financial and nonfinancial information to measure the performance of a business.

True

False

2 points   

QUESTION 4

1. The three common types of responsibility centers are referred to as cost centers, profit centers, and investment centers.

True

QUESTION 5

1. A disadvantage to using the residual income performance measure is that it encourages managers to spend only the minimum acceptable return on assets set by upper management.

True

False

2 points   

QUESTION 6

1. The profit center income statement should include only revenues and expenses that are controlled by the manager.

True

False

2 points   

QUESTION 7

1. Responsibility accounting reports for profit centers are normally in the form of income statements.

True

False

2 points   

QUESTION 8

1. Responsibility accounting reports that are given to lower-level managers are usually very detailed; in turn, higher-level managers will be given a summary report.

True

False

2 points   

QUESTION 9

1. A responsibility center in which the department manager has responsibility for and authority over costs, revenues, and assets invested in the department is termed a cost center.

True

False

2 points   

QUESTION 10

1. Under the cost price approach, the transfer price is the price at which the product or service transferred could be sold to outside buyers.

True

False

2 points   

QUESTION 11

1. In return on investment analysis, the investment turnover component focuses on efficiency in the use of assets and indicates the rate at which sales are being generated for each dollar of invested assets.

True

False

2 points   

QUESTION 12

1. The primary disadvantage of decentralized operations is that decisions made by one manager may affect other managers in such a way that the profitability of the entire company may suffer.

True

False

2 points   

QUESTION 13

1. The rates at which centralized  services are charged to each division are called service department charge rates.

True

False

2 points   

QUESTION 14

1. Controllable expenses are those that can be influenced by the decisions of the profit center management.

True

False

2 points   

QUESTION 15

1. If income from operations for a division is $5,000, invested assets are $25,000, and sales are $30,000, the profit margin is 20%.

True

False

2 points   

QUESTION 16

1. The excess of divisional income from operations over a minimum acceptable income from operations is termed the residual income.

True

False

2 points   

QUESTION 17

1. The underlying principle of allocating direct operating expenses to departments is to assign to each department an amount of expense proportional to the revenues of that department.

True

False

2 points   

QUESTION 18

1. By using the return on investment as a divisional performance measure, divisional managers will always be motivated to invest in proposals that will increase the overall return for the company.

True

False

2 points   

QUESTION 19

1. In an investment center, the manager has the responsibility and the authority to make decisions that affect not only costs and revenues, but also the plant assets invested in the center.

True

False

2 points   

QUESTION 20

1. A responsibility center in which the authority over and responsibility for costs and revenues is vested in the department manager is termed a profit center.

True

False

2 points   

QUESTION 21

1. The manager of the Furniture Department of a leading retailer does not control the salaries of departmental personnel.

True

False

2 points   

QUESTION 22

1. If divisional income from operations is $100,000, invested assets are $850,000, and the minimum return on invested assets is 8%, the residual income is $68,000.

True

False

2 points   

QUESTION 23

1. The ratio of sales to investment is termed the return on investment.

True

False

QUESTION 24

1. The minimum accepted divisional income from operations is set by top management by establishing a maximum return considered acceptable for invested assets.

True

False

2 points   

QUESTION 25

1. Property tax expense for a department store’s store equipment is an example of a direct expense.

True

False

2 points   

QUESTION 26

1. The ratio of sales to invested assets, which is also a factor in the DuPont formula for determining the return on investment, is called

a. investment turnover
b. indirect margin
c. profit margin
d. cost ratio

2 points   

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