Question 1

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

First, we need to calculate the minimum required profit that Mason Corporation needs to earn on its invested assets. We do this by multiplying the invested assets by the desired minimum rate of return:
$650,000 x 0.15 = $97,500

Next, we can use the formula for profit margin, which is:

Profit Margin = Income from Operations / Sales

Plugging in the values we have, we get:

Profit Margin = $99,000 / $700,000 = 0.1414 (rounded to four decimal places)

Multiplying this by 100 gives us a profit margin of 14.14%. Since the minimum required profit is $97,500 and the actual income from operations is $99,000, which is greater than the minimum required profit, we know that the profit margin is greater than the minimum required rate of return of 15%. Therefore, the best choice is D, 14.1%.

Question 2

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 3

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 4

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 5

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

Residual income is calculated as the income from operations minus the product of the invested assets and the desired minimum rate of return. Here, $99,000 - ($650,000 * 0.15) = $1,500.

Question 6

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

Investment turnover is calculated as Sales divided by Invested Assets. For Chicks Corporation, it is $1,210,000 / $1,100,000 = 1.1.

Question 7

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

Since the established minimum rate of return is 7%, we cannot determine if Clydesdale Company is meeting or exceeding its investment expectations solely based on the investment turnover ratio. We would need to calculate the return on investment (ROI) to determine if the company is meeting its expectations.

Question 8

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 Rails Division is:
A) $60,800
B) $33,600
C) $8,700
D) $21,150

Accepted Answer

The income from operations can be calculated by subtracting the cost of goods sold and operating expenses from the net sales revenue.
For Rails Division, the income from operations would be:
Net Sales Revenue (from the table) - Cost of Goods Sold (from the table) - Operating Expenses (from the table) = $81,000 - $37,200 - $10,200 = $33,600. Therefore, the correct answer is B.

Question 9

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 Rails Division is:
A) $60,800
B) $33,600
C) $8,700
D) $21,150

Accepted Answer

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

Question 10

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 11

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 12

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 rate of return on investment (ROI) is calculated by dividing the income from operations by the invested assets. Here, $70,400 / $220,000 = 0.32 or 32%.

Question 13

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 is closely tied to specific operational needs of each department or division, rather than a centralized service provided across the organization.

Question 14

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 15

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 typically a line department responsible for producing goods or providing services. The other options listed (payroll accounting, information systems, and purchasing) are centralized service departments.

Question 16

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 profit margin is calculated as (Income from Operations / Sales) * 100. For Chicks Corporation, it is ($302,500 / $1,210,000) * 100 = 25%.

Question 17

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

Investment turnover is calculated as Sales divided by Invested Assets. For Mason Corporation, it is $700,000 / $650,000 = 1.08.

Question 18

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 - (desired rate of return x invested assets)
Residual income = 302,500 - (0.15 x 1,100,000)
Residual income = $137,500

Therefore, the best choice is C, as it represents the correct calculation for Chicks Corporation's residual income.

Question 19

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 is calculated by subtracting the cost of goods sold from the total sales revenue. From the given information, we have:
Total Sales Revenue for Locomotive Division = $143,040
Cost of Goods Sold for Locomotive Division = $95,760
Therefore, Gross Profit for Locomotive Division = Total Sales Revenue - Cost of Goods Sold = $143,040 - $95,760 = $47,280. 
Hence, the correct answer is D.

Question 20

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 both revenues and expenses, and will provide information on the net income or loss from operations. Costs and fixed assets may also be included in these reports, but they are not essential components. Thus, the best answer is D - revenues, expenses, net income or loss from operations.

Quiz 24: Performance Evaluation for Decentralized Operations

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:

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 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?

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 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:

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?

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 Rails Division is:

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 Rails Division is:

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 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:

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:

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?

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:

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

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:

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:

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 gross profit for the Locomotive Division is:

Responsibility accounting reports for profit centers will include