ACCT 526 ANSWERS AND QUESTIONS SET A+
✔✔Which of the following is a benefit of decentralization? - ✔✔Decisions are more likely
to be made by managers who have specific local knowledge.
✔✔Which of the following is affected by the price charged for goods transferred
between two divisions of a company that are both treated as responsibility centers? -
✔✔profits of both selling and buying decisions
✔✔Which of the following should be focused on by the central management in a
decentralized company? - ✔✔the long run survival of the organization
✔✔Which of the following is a reason for a firm to decentralize? - ✔✔ease of gathering
and using local information
✔✔Which of the following statements is true of a negotiated transfer price? - ✔✔A
negotiated transfer price allows the selling and buying divisions to share any cost
savings resulting from avoided costs.
✔✔Teakwood Log Division is the selling division and Tables Division is the buying
division of Top Shine Furniture Enterprises. Teakwood logs can be sold to outside
buyers at $2,000 per log. Which of the following is the best transfer price for both the
divisions of the company? - ✔✔market price
✔✔Which of the following statements is true of the ceiling of the bargaining range of the
transfer price? - ✔✔It is the maximum transfer price that would leave the buying division
no worse off if an input were purchased from an internal division than if the same goods
were purchased externally.
✔✔A(n) _____ is the price charged for a component by the selling division to the buying
division of the same company. - ✔✔transfer price
✔✔The practice of delegating authority to division-level managers by top management
is: - ✔✔decentralization
, ✔✔Which of the following is not a reason for decentralizing? - ✔✔allowing top
management to make all key operating decisions throughout the company
✔✔A responsibility center in which a manager is responsible only for costs is a(n) -
✔✔cost center
✔✔A responsibility center in which a manager is responsible for revenues, costs, and
investments is a(n): - ✔✔investment center
✔✔Division A manufactures an aircraft engine component with unit variable product
cost of $38 and market price of $50. Division A incurs shipping costs of $3 per unit for
sales to outside parties only. Division B uses this component in the manufacture of its
own engine production activities. Top management allows negotiated transfer pricing. If
Division A is operating at full capacity, the maximum transfer price (the ceiling of the
bargaining range) is: - ✔✔$50
✔✔Which of the following is a perspective of the Balanced Scorecard? - ✔✔learning
and growth (infrastructure), customer, internal business process, financial
✔✔ the point at which total revenue equals total cost (both fixed and variable cost). At
breakeven, profit is zero. - ✔✔break even point
✔✔Alpha Company is evaluating a make-or-buy decision. Which of the following is an
example of an irrelevant cost with regard to a make-or-buy decision? - ✔✔cost of
security guard who will guard the finished goods inventory
✔✔fixed expenses that cannot be traced to individual segments or products. They will
continue to exist even if one segment or product is eliminated. - ✔✔common fixed
expense
✔✔the difference between total sales and total variable costs on a total basis, or price
minus unit variable cost on a per-unit basis. Total contribution margin is the amount left
over from sales to contribute to covering fixed costs and profit. - ✔✔contribution margin
✔✔the cost behavior-based income statement. Costs are separated into fixed and
variable categories. First, total variable cost is subtracted from sales to get the
contribution margin. Next, total fixed expenses are subtracted to get operating income
(profit). - ✔✔contribution margin income statement
✔✔the ratio of total contribution margin to sales or of unit contribution to price.
Contribution margin ratio is also computed as 1 (100%) minus the variable cost ratio. It
✔✔Which of the following is a benefit of decentralization? - ✔✔Decisions are more likely
to be made by managers who have specific local knowledge.
✔✔Which of the following is affected by the price charged for goods transferred
between two divisions of a company that are both treated as responsibility centers? -
✔✔profits of both selling and buying decisions
✔✔Which of the following should be focused on by the central management in a
decentralized company? - ✔✔the long run survival of the organization
✔✔Which of the following is a reason for a firm to decentralize? - ✔✔ease of gathering
and using local information
✔✔Which of the following statements is true of a negotiated transfer price? - ✔✔A
negotiated transfer price allows the selling and buying divisions to share any cost
savings resulting from avoided costs.
✔✔Teakwood Log Division is the selling division and Tables Division is the buying
division of Top Shine Furniture Enterprises. Teakwood logs can be sold to outside
buyers at $2,000 per log. Which of the following is the best transfer price for both the
divisions of the company? - ✔✔market price
✔✔Which of the following statements is true of the ceiling of the bargaining range of the
transfer price? - ✔✔It is the maximum transfer price that would leave the buying division
no worse off if an input were purchased from an internal division than if the same goods
were purchased externally.
✔✔A(n) _____ is the price charged for a component by the selling division to the buying
division of the same company. - ✔✔transfer price
✔✔The practice of delegating authority to division-level managers by top management
is: - ✔✔decentralization
, ✔✔Which of the following is not a reason for decentralizing? - ✔✔allowing top
management to make all key operating decisions throughout the company
✔✔A responsibility center in which a manager is responsible only for costs is a(n) -
✔✔cost center
✔✔A responsibility center in which a manager is responsible for revenues, costs, and
investments is a(n): - ✔✔investment center
✔✔Division A manufactures an aircraft engine component with unit variable product
cost of $38 and market price of $50. Division A incurs shipping costs of $3 per unit for
sales to outside parties only. Division B uses this component in the manufacture of its
own engine production activities. Top management allows negotiated transfer pricing. If
Division A is operating at full capacity, the maximum transfer price (the ceiling of the
bargaining range) is: - ✔✔$50
✔✔Which of the following is a perspective of the Balanced Scorecard? - ✔✔learning
and growth (infrastructure), customer, internal business process, financial
✔✔ the point at which total revenue equals total cost (both fixed and variable cost). At
breakeven, profit is zero. - ✔✔break even point
✔✔Alpha Company is evaluating a make-or-buy decision. Which of the following is an
example of an irrelevant cost with regard to a make-or-buy decision? - ✔✔cost of
security guard who will guard the finished goods inventory
✔✔fixed expenses that cannot be traced to individual segments or products. They will
continue to exist even if one segment or product is eliminated. - ✔✔common fixed
expense
✔✔the difference between total sales and total variable costs on a total basis, or price
minus unit variable cost on a per-unit basis. Total contribution margin is the amount left
over from sales to contribute to covering fixed costs and profit. - ✔✔contribution margin
✔✔the cost behavior-based income statement. Costs are separated into fixed and
variable categories. First, total variable cost is subtracted from sales to get the
contribution margin. Next, total fixed expenses are subtracted to get operating income
(profit). - ✔✔contribution margin income statement
✔✔the ratio of total contribution margin to sales or of unit contribution to price.
Contribution margin ratio is also computed as 1 (100%) minus the variable cost ratio. It
