tS1: The product managers’ salary is a good example of a common cost which normally
could not be assigned to products on segmented income statement except on arbitrary
basis. fS2: The division’s contribution margin will remain the same if a division’s
traceable fixed expense increase, considering all other things being equal.
Both statements are correct.
Both statements are incorrect.
Only S1 is incorrect.
Only S1 is correct.
Which of the following is not an advantage of decentralization?
Reduction of problems to manageable size
Better use of local knowledge
Faster response
Lower cost of monitoring and controlling the activities of local managers
Which of the following items is LEAST likely to appear on the performance report of the
manager of a product line?
Variable manufacturing costs for products in the line
A share of company-wide advertising.
Revenues from the line.
Selling expenses for the line
Nevada, Inc. has two divisions, one located in Las Vegas and the other located in Reno.
Las Vegas sells selected goods to Reno for use in various end-products. Assuming that
the transfer price set by Nevada Inc. do not influence the decisions made by the two
divisions, which of the following correctly describes the impact of the transfer prices on
divisional profits and overall company profits for Las Vegas profit, Reno profit and
Nevada Profit?
Affected, Affected, Affected
Not Affected , Not Affected, Affected
Affected, Affected, Not affected
Affected, Not affected, Affected
tS1:The sales price variance is the difference between the actual selling price and the
planned selling price multiplied by actual units sold. tS2: Centralization is the process of
retaining authority in the hands of few high level managers.
Both statements are correct.
Only S1 is incorrect.
Both statements are incorrect.
Only S1 is correct.
Which of the following describes the goal that should be pursued when setting transfer
prices?
Maximize profits of the buying division
Allow top management to become actively involved when calculating the proper dollar amounts
Maximize profits of the selling division
Establish incentives for autonomous division managers to make decisions that are in the overall
organization’s best interests
fS1: Profit center is the least complex segment of area of responsibility for which costs
are allocated. fS2: A company that has a profit can increase its return on investment by
increasing sales revenue and operating expenses by the same peso amount.
Only S1 is incorrect.
Both statements are incorrect.
Only S1 is correct.
Both statements are correct.
ROI calculation will indicate;
how effectively a company used its invested capital
the percentage of each sales dollar that is invested in assets
The invested capital generated from each dollar of income
the sales dollars generated from each dollar of income
fS1: Achieving goal congruence is less important in a centralized organization than in a
decentralized one. S2:It is not always possible to separate the variable and fixed
components of actual costs.
Both statements are correct.
Only S1 is correct.
Only S1 is incorrect.
Both statements are incorrect.
fS1: Strategic performance measurement system is helpful in pinpointing inefficiency.
tS2: Some managers prefer to use standard cost rather than market price in controlling
transfers between division.
Only S1 is correct.
Only S1 is incorrect.
Both statements are correct.
Both statements are incorrect.
Indicate your final answer on this form.
Amounts and percentages must be rounded to two decimal places (P100.3333, type 100.33; 66.6666%, type 66.67).
Your answer
Compute ROI (use operating income before income tax)
Your answer
Your answer
Your answer
Your answer
Your answer
Compute Residual Income (use operating income before income tax)
Your answer
Your answer
Your answer
