1. In a centralized company, all major planning and operating decisions are made by
a. employees.
b. stockholders.
c. top management.
d. division managers.
2. All of the following are considered advantages of decentralized operations except that it
a. allows managers closest to operations to make decisions.
b. provides excellent training for managers.
c. helps retain managers.
d. duplicates assets and expenses.
3. All of the following are types of responsibility centers except
a. fulfillment centers.
b. cost centers.
c. profit centers.
d. investment centers.
4. Investment centers have the responsibility for
a. costs.
b. revenues.
c. investments in assets.
d. All of these choices are correct.
5. Controllable revenues are revenues earned by the __________ center.
a. service
b. cost
c. profit
d. None of these choices are correct.
6. Service department charges are computed by
a. service usage multiplied by the service department charge rate.
b. units sold multiplied by average cost per unit.
c. service usage divided by the service department charge rate.
d. None of these choices are correct.
7. The rate of return (ROI) on investment is computed as
a. net income divided by invested assets.
b. revenue divided by invested assets.
c. income from operations divided by invested assets.
d. None of these choices are correct.
8. When comparing return on investment (ROI) over time, a favorable trend would be
a. an increase in ROI.
b. a decrease in ROI.
c. no change in ROI.
d. fluctuating increases and decreases in ROI.
9. The excess of income from operations over a minimum acceptable income from operations is called
a. net income.
b. residual income.
c. operating income.
d. None of these choices are correct.
10. The three common approaches to setting transfer prices include all of the following except the __________ approach.
a. market price
b. negotiated price
c. cost price
d. preferred pricing
11. Using the __________ approach, the transfer price will be the price at which the product or service transferred could be sold to outside buyers.
a. market price
b. negotiated price
c. cost price
d. preferred pricing
12. The __________ approach allows the managers to agree among themselves on a transfer price.
a. market price
b. negotiated price
c. cost price
d. preferred pricing