Question 1

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%. What is Clydesdale Company's profit margin?
A) 20%
B) 80%
C) 44.4%
D) 18%

Accepted Answer

The answer of The Clydesdale Company has sales of $4,500,000....

Question 2

The following is a measure of a manager's performance working in a profit center.
A) balance sheet
B) rate of return and residual income measures
C) budget performance report
D) divisional income statements

Accepted Answer

The answer of The following is a measure of a...

Question 3

Mason Corporation had $650,000 in invested assets, sales of $700,000, income from operations amounting to $99,000, and a desired minimum rate of return of 15%. The investment turnover for Mason is:
A) 1.08
B) .93
C) 6.57
D) 7.07

Accepted Answer

The answer of Mason Corporation had $650,000 in invested assets,...

Question 4

Mason Corporation had $650,000 in invested assets, sales of $700,000, income from operations amounting to $99,000, and a desired minimum rate of return of 15%. The profit margin for Mason is:
A) 7.1%
B) 20%
C) 15.2%
D) 14.1%

Accepted Answer

Profit Margin = Income from Operations / Sales

Profit Margin= $99,000 / $700,000

Profit Margin = 0.1414 or 14.14%

Since the desired minimum rate of return is 15%, the profit margin of 14.14% is not sufficient. Therefore, Mason Corporation needs to improve its performance to meet its desired rate of return.

Question 5

Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income from operations amounting to $302,500, and a desired minimum rate of return of 15%. The residual income for Chicks is:
A) $165,000
B) $302,500
C) $137,500
D) $191,500

Accepted Answer

Residual income = Income from operations - (Minimum rate of return x Invested assets)
= $302,500 - (0.15 x $1,100,000)
= $302,500 - $165,000
= $137,500

Therefore, the residual income for Chicks Corporation is $137,500.

Question 6

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31:  The net income for Train Corporation is:
A) $83,180
B) $35,940
C) $48,390
D) $60,840

Accepted Answer

The answer of The following financial information was summarized from...

Question 7

Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income from operations amounting to $302,500, and a desired minimum rate of return of 15%. The profit margin for Chicks is:
A) 25%
B) 22%
C) 15%
D) 27.5%

Accepted Answer

The answer of Chicks Corporation had $1,100,000 in invested assets,...

Question 8

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%. What is Clydesdale Company's residual income?
A) $252,000
B) $900,000
C) $1,400,000
D) $760,000

Accepted Answer

Residual income = Net operating income - (Invested assets x Minimum rate of return)
Net operating income = Sales - Operating expenses = $4,500,000 - $3,600,000 = $900,000
Minimum rate of return = 7%
Invested assets = $2,000,000

Residual income = $900,000 - ($2,000,000 x 0.07) = $760,000

Therefore, the answer is D) $760,000.

Question 9

Which of the following would not be considered an internal centralized service department?
A) Payroll accounting department
B) Manufacturing department
C) Information systems department
D) Purchasing department

Accepted Answer

The manufacturing department is not a service department, but a production department that creates goods or services. The other options (payroll accounting, information systems, and purchasing) are all examples of internal centralized service departments that support the organization's operations.

Question 10

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31:  The gross profit for the Locomotive Division is:
A) $57,960
B) $14,790
C) $27,240
D) $47,280

Accepted Answer

The gross profit for the Locomotive Division can be calculated as:
Net Sales Revenue – Cost of Goods Sold = Gross Profit
$369,600 – $322,320 = $47,280.
Therefore, the correct option is D.

Question 11

Mason Corporation had $650,000 in invested assets, sales of $700,000, income from operations amounting to $99,000, and a desired minimum rate of return of 15%. The residual income for Mason is:
A) $0
B) $84,150
C) ($6,000)
D) $1,500

Accepted Answer

The answer of Mason Corporation had $650,000 in invested assets,...

Question 12

Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income from operations amounting to $302,500, and a desired minimum rate of return of 15%. The investment turnover for Chicks is:
A) 1.3
B) 1.5
C) 1.0
D) 1.1

Accepted Answer

The answer of Chicks Corporation had $1,100,000 in invested assets,...

Question 13

Avey Corporation had $275,000 in invested assets, sales of $330,000, income from operations amounting to $49,500 and a desired minimum rate of return of 7.5%. The rate of return on investment for Avey Corporation is:
A) 8%
B) 10%
C) 18%
D) 7.5%

Accepted Answer

The answer of Avey Corporation had $275,000 in invested assets,...

Question 14

Hamlin Corporation had $220,000 in invested assets, sales of $242,000, income from operations amounting to $70,400, and a desired minimum rate of return of 3%. The rate of return on investment for Hamlin is:
A) 7%
B) 32%
C) 3%
D) 29%

Accepted Answer

The answer of Hamlin Corporation had $220,000 in invested assets,...

Question 15

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%. What is Clydesdale Company's rate of return on investment?
A) 56%
B) 20%
C) 45%
D) 25%

Accepted Answer

The answer of The Clydesdale Company has sales of $4,500,000....

Question 16

Some organizations use internal service departments to provide like services to several divisions or departments within an organization. Which of the following would probably not lend itself as a service department?
A) Inventory Control
B) Payroll Accounting
C) Information Systems
D) Human Resources

Accepted Answer

Inventory control is typically a function that directly supports individual departments or divisions and involves physical goods or materials, whereas service departments usually provide more intangible support functions such as accounting, IT, or HR services. Therefore, inventory control would not typically be classified as a service department within an organization.

Question 17

Responsibility accounting reports for profit centers will include
A) costs.
B) revenues.
C) expenses and fixed assets.
D) revenues, expenses, net income or loss from operations.

Accepted Answer

Responsibility accounting reports for profit centers will include revenues, expenses, net income or loss from operations. This is because profit centers are responsible for generating revenues and incurring expenses, and the ultimate goal of a profit center is to generate a profit or net income. Therefore, these reports will provide information on both the revenues and expenses of the profit center, as well as the resulting net income or loss from operations.

Question 18

Managers of what type of decentralized units have authority and responsibility for revenues, costs, and assets invested in the unit?
A) Profit center
B) Investment center
C) Production center
D) Cost center

Accepted Answer

Investment centers have authority and responsibility for revenues, costs, and assets invested in the unit. Profit centers have authority and responsibility for revenues and costs, but not for assets invested in the unit. Production centers have authority and responsibility for costs of producing goods or services. Cost centers have authority and responsibility for costs, but not for revenues or assets invested in the unit.

Question 19

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31:  The income from operations for the Locomotive Division is:
A) $57,960
B) $14,790
C) $27,240
D) $47,280

Accepted Answer

The answer of The following financial information was summarized from...

Question 20

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%. What is Clydesdale Company's investment turnover?
A) 1.80
B) 2.25
C) 1.25
D) 1.4

Accepted Answer

Investment Turnover = Sales / Invested Assets

Investment Turnover = $4,500,000 / $2,000,000

Investment Turnover = 2.25

Therefore, the investment turnover of the Clydesdale Company is 2.25.

Quiz 23: Performance Evaluation for Decentralized Operations

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%. What is Clydesdale Company's profit margin?

The following is a measure of a manager's performance working in a profit center.

Mason Corporation had $650,000 in invested assets, sales of $700,000, income from operations amounting to $99,000, and a desired minimum rate of return of 15%. The investment turnover for Mason is:

Mason Corporation had $650,000 in invested assets, sales of $700,000, income from operations amounting to $99,000, and a desired minimum rate of return of 15%. The profit margin for Mason is:

Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income from operations amounting to $302,500, and a desired minimum rate of return of 15%. The residual income for Chicks is:

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31: The net income for Train Corporation is:

Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income from operations amounting to $302,500, and a desired minimum rate of return of 15%. The profit margin for Chicks is:

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%. What is Clydesdale Company's residual income?

Which of the following would not be considered an internal centralized service department?

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31: The gross profit for the Locomotive Division is:

Mason Corporation had $650,000 in invested assets, sales of $700,000, income from operations amounting to $99,000, and a desired minimum rate of return of 15%. The residual income for Mason is:

Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income from operations amounting to $302,500, and a desired minimum rate of return of 15%. The investment turnover for Chicks is:

Avey Corporation had $275,000 in invested assets, sales of $330,000, income from operations amounting to $49,500 and a desired minimum rate of return of 7.5%. The rate of return on investment for Avey Corporation is:

Hamlin Corporation had $220,000 in invested assets, sales of $242,000, income from operations amounting to $70,400, and a desired minimum rate of return of 3%. The rate of return on investment for Hamlin is:

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%. What is Clydesdale Company's rate of return on investment?

Some organizations use internal service departments to provide like services to several divisions or departments within an organization. Which of the following would probably not lend itself as a service department?

Responsibility accounting reports for profit centers will include

Managers of what type of decentralized units have authority and responsibility for revenues, costs, and assets invested in the unit?

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31: The income from operations for the Locomotive Division is:

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%. What is Clydesdale Company's investment turnover?