Week 3 – Study Plan Chapter 14 CNOW Assignment

All correct answers are highlighted in yellow

•1. Describe types of operational responsibility.

100%

PreTest Result:

Problem #1 - Correct

When operational responsibility is centralized, all major planning and operating decisions are made by _____.

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•2. Describe and illustrate responsibility reporting for a cost center.

100%

PreTest Result:

Problem #2 - Correct

Which of the following statements is true of cost centers?

a.Responsibility accounting reports for cost centers take the form of income statements.

b.Managers in cost centers make decisions concerning sales or the amount of fixed assets

invested in the centers.

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

d.Managers in cost centers have the responsibility and authority to make decisions that

affect revenues.

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•3. Describe and illustrate responsibility reporting for a profit center.

100%

PreTest Result:

Problem #5 - Correct

Chameleon Corporation’s payroll division shared the following information for August 20Y6:

Assembly division Purchasing division

Part-time employees 300 payroll checks 150 payroll checks

Permanent employees 100 payroll checks 200 payroll checks

If the payroll division charges $50 per check issued, determine the total amount of payroll costs charged to the purchasing division for payroll service.

Quiz Result: (Showing result of attempt # 1)

Revenues $500,000

Operating Expenses

Service department charges: $200,000

Purchasing $25,000

Payroll accounting $60,000

Legal $10,000

Based on the given information, calculate the operating income of the profit center.

c.Service department charge rate = Total service department usage / Service department

charge

d.Service department charge rate = Service department expense × Service usage Feedback

Correct. Service department charge rate = Service department expense / Total service department usage

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•4. Describe and illustrate responsibility reporting for an investment center.

100%

PreTest Result:

Problem #8 - Correct

Which of the following formulas is used to calculate the rate of return on investment?

a.Rate of return on investment = Estimated average annual income / Sales

b.Rate of return on investment = Operating income / Invested assets

c.Rate of return on investment = Invested assets / Sales

d.Rate of return on investment = Initial cost outlays / Invested assets

Revenues $650,000

Operating expenses $400,000

Service department charges $ 95,000

Invested assets $600,000

Assume that Paprus Inc. has established 20% as the minimum acceptable return on divisional assets. Determine the residual income for the manufacturing division.

a.it always leads divisional managers to accept new investments that could be profitable for

the company as a whole.

b.it overcomes some of the disadvantages of residual income.

c.the three factors subject to control by divisional managers (revenues, expenses, and

invested assets) are considered.

d.it encourages division managers to maximize operating income in excess of the minimum.

Feedback

Correct. The return on investment is useful because the three factors subject to control by divisional managers (revenues, expenses, and invested assets) are considered.

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•5. Describe and illustrate transfer pricing for decentralized segments of a business.

100%

PreTest Result:

Problem #3 - Incorrect

Under the negotiated price approach of setting transfer prices, an increase in the purchasing division’s operating income is calculated as:

a.(Variable cost per unit – Transfer price) × Units transferred.

b.(Market price – Transfer price) × Units transferred.

c.(Transfer price – Variable cost per unit) × Units transferred.

d.(Transfer Price – Fixed factory overhead) × Units transferred. Feedback

Incorrect. The negotiated price approach allows managers to agree (negotiate) among themselves on a transfer price. The only constraint is that the transfer price be less than the market price but greater than the supplying division’s variable costs per unit.

Problem #7 - Correct

The objective of setting a transfer price is:

a.to identify the departments responsible for major differences in reporting of costs.

b.to encourage the duplication of assets and expenses across divisions.

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

income.

d.to promote a price war between the different divisions of a company. Feedback

Correct. The objective of setting a transfer price is to motivate managers to behave in a manner that will increase the overall company income.

Quiz Result: (Showing result of attempt # 2)

d.(Transfer price – Variable cost per unit) × Units transferred.

Feedback

Correct. Increase in the purchasing division’s operating income = (Market price – Transfer price) × Units transferred

b.If variable product cost per unit is used under the cost price approach to set transfer prices, direct materials and direct labor are excluded from transfer price.

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

prices, direct labor cost is excluded from transfer price.

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

prices, direct materials cost is excluded from transfer price.

Feedback

Correct. 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.

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•6. Describe and illustrate balanced scorecard and related metrics.

100%

PreTest Result:

Problem #6 - Correct

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

a.To focus on a company’s research and development efforts in developing new products

and improving current products

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

c.To focus on increasing the future value of the company by educating and training

employees and managers

a.It is the method used to encourage the duplication of assets and expenses across

divisions.

b.It is the process of delegating authority to managers closest to the operations.

c.It is a set of multiple performance metrics for a company that include metrics in addition to

traditional financial metrics.

d.It aims at promoting price war between different divisions of a company. Feedback

Correct. A balanced scorecard is a set of multiple performance metrics for a company that include metrics in addition to traditional financial metrics.

Quiz Attempts: 0