Management Accounting Information For Decision Making And Strategy Execution 6th Edition By Anthony A Atkinson – SM

Chapter 11 Quiz (Choose the best answer)

The goals established by a responsibility center manager should be all of the following, EXCEPT:
specific.
measurable.
those that promote the long-term interests of the larger organization.
independent of the other responsibility centers.

Which of the following is the most appropriate measure used to evaluate the performance of an investment center?
Costs relative to a budget.
Profits relative to a budget.
Return on investment relative to a budget.
Revenues relative to a budget.

Which of the following is FALSE regarding decentralization?
Decision-making authority is delegated to frontline decision makers.
Employees can identify customer tastes and requirements quickly.
Decentralization is more suited to organizations in stable environments.
Decentralized organizations are more adaptive.

Which of the following is NOT one of the four main approaches to transfer pricing?
Revenue based transfer pricing
Market-based transfer pricing
Administrative transfer pricing
Negotiated transfer pricing

Managers of revenue centers are least likely to control:
sales price.
mix of stock carried.
promotional activities.
purchase of capital equipment.

Probably the most significant problem in applying the controllability principle is that:
many revenues and costs are jointly earned.
it applies only to very large responsibility centers.
it is virtually impossible to determine the manager’s responsibilities.
it applies only to very small responsibility centers.

Braker Industries is a division of a major corporation. Data concerning the most recent year appears below:
Sales $17,340,000
Net Income $1,500,000
Investment $6,000,000
The division’s return on investment is closest to ____________.
9%
25%
289%
400%

Segment margin reports should be interpreted with caution for all of the following reasons EXCEPT:
they may include an arbitrary allocation of common fixed costs.
they reflect many assumptions that disguise underlying issues.
they may rest on subjective revenue and cost allocation assumptions.
the revenue figures reflect important assumptions and allocations that may be misleading.

The biggest problem with cost-based transfer prices is:
they require too much negotiation.
they are very difficult to put in place.
they are based on application of simple rules.
there are too many cost possibilities and many will not provide the correct economic signal.

If Manus Division’s income is 12% of sales, capital employed is $4,000,000, the cost of capital is 10%, and sales revenue is $10,000,000, then Manus Division’s residual income is:
$800,000.
$600,000.
$520,000.
$320,000.

Solutions to Chapter 11 Quiz

d
c
c
a
d
a
b
a
d
a