ACC 202 – STUDY PLAN CHAPTER 14

Iguana Inc.’s purchasing department has incurred an expense of $120,000 for the year ended December 31, 20Y7. If the purchasing department receives 40,000 purchase requisitions throughout the year, calculate the purchasing charge rate. d. $3 per purchase requisition

The number of sales returns is a performance metric for _____. c. customer service

Kangaroo Paw Inc. has an operating income of $54,000, invested assets of $450,000, and sales of $650,000. Calculate Kangaroo Paw’s return on investment. c. 12%

Which of the following is the main objective of internal processes?

b. To focus on improving the company’s operations to eliminate waste and

inefficiencies

Since investment center managers have the responsibility and the authority to make decisions that affect not only costs and revenues, but also the assets invested in the center, _____ is used as a performance measure to evaluate their performance. c. residual income

Which of the following statements is true of a decentralized company?

d. In a decentralized company, the division managers are responsible for planning

and controlling the operations of their divisions.

The objective of setting a transfer price is:

c. to motivate managers to behave in a manner that will increase the overall

company income.

_____ is the excess of operating income over a minimum acceptable operating income. a. Residual income

Which of the following expenses is considered a controllable expense by profit center managers?

b. A utility expense

Which of the following formulas is used to calculate the rate of return on investment? b. Rate of return on investment = Operating income / Invested assets

Division A of Aztec Manufacturing purchases materials to be used in production from an outside supplier for $20 per unit. The same materials are produced by Division B. Division B incurs variable costs of $10 per unit. Currently, Division B is able to sell only 320,000 units to outside buyers out of 400,000 units produced. In this situation, if a transfer price of $18 per unit is established between the two divisions and 80,000 units of materials are transferred to Division A, by what amount would Division B’s operating income increase?

ACC 202 – STUDY PLAN CHAPTER 14 b. $640,000

A(n) _____ manager has the responsibility and authority for making decisions that affect revenues and costs but does not make decisions concerning the fixed assets invested in the center.

d. profit center

The primary accounting tools for planning and controlling costs for a cost center are: a. budgets and budget performance reports.

Which of the following statements is true if variable product cost per unit is used under the cost price approach to set transfer prices?

a. If variable product cost per unit is used under the cost price approach to set

transfer prices, fixed factory overhead cost is excluded from transfer price.

Which of the following statements is true of cost centers?

c. Cost centers may vary in size from a small department to an entire

manufacturing plant.

Which of the following is the formula for calculating service department charge rate?

a. Service department charge rate = Service department expense / Total service

department usage

Which of the following statements is true if total product cost per unit is used under the cost price approach to set transfer prices?

b. If total product cost per unit is used under the cost price approach to set transfer prices, direct materials, direct labor, and factory overhead are included in transfer price.