Managerial Accounting

Division B wants to purchase a part from Division A. Division A's variable cost per unit is $18. Allocated fixed costs are $5 per unit. Division A's normal selling price for the part is $30 per unit. Division A has enough idle capacity to be able to supply the needed parts without interrupting its regular sales. The lowest transfer price per unit that Division A might accept is $_________________.

18

True or false: Suboptimization occurs when responsibility center managers make decisions that are in the best interests of their own responsibility center but not the company as a whole. True false question.

False

True or false: The variable costs of service departments should be charged to consuming departments in a predetermined lump-sum amount, so that the cost of the service can be properly traced to departments, products, and customers.

False

Which of the following statements are correct? Multiple select question. Variable service department costs are charged to operating divisions based on the budgeted rate and budgeted activity. Fixed service department costs are based entirely on budgeted data. Fixed service department costs are based on actual cost and budgeted activity. Variable service department costs are charged to operating divisions based on the budgeted rate and actual activity.

Fixed service department costs are based entirely on budgeted data. Variable service department costs are charged to operating divisions based on the budgeted rate and actual activity.

Return on investment =

Net operating income ÷ Average operating assets

Why is using the gross cost of operating assets when calculating ROI preferable to using the net book value?

Replacing an existing asset will not automatically decrease ROI

Net operating income ÷ Average operating assets =

Return on investment

Which of the following is NOT a service department?

Sales

When a department has enough idle capacity to supply a part to another division within the company without interrupting current sales, what is the lowest price the selling division might accept? Multiple choice question.

Variable cost per unit

When the selling division has some idle capacity, but will have to interrupt current sales to supply the buying division, how is the lowest acceptable transfer price calculated?

Variable cost per unit + (Total contribution margin on lost sales ÷ Total transferred units)

The service department remains responsible for any differences between the budgeted and actual costs of their department when operating departments are charged the service department's _______________ costs

budgeted, budget, expected, or estimated

Disadvantages of decentralization include ______.

clashing objectives between departments and the organization spreading innovative ideas may be difficult lack of coordination

Lower-level management goals that are inconsistent with company goals are a possible disadvantage of ____________ .

decentralization

Lower-level management goals that are inconsistent with company goals are a possible disadvantage of ________ .

decentralization or decentralisation

Service department costs are NOT allocated to operating departments to ______.

help measure the profitability of service departments

Service department costs are NOT allocated to operating departments to ______. Multiple choice question.

help measure the profitability of service departments

Net operating income is income before ____________and _____________ .

interest; taxes

If cost is used as a transfer price, the only division with an opportunity to make a profit on the transfer is the division that ______.

makes the final sale to an outside party

In order to fully understand how a manager's decisions can affect ROI, both __________ and __________ should be computed

margin; turnover

If service department costs are not allocated ______.

operating departments will be inclined to waste their resources

If service department costs are not allocated ______. Multiple choice question.

operating departments will be inclined to waste their resources

If the transfer has no effect on fixed cost, the transfer price from the selling division's standard must be equal to or greater than the (variable cost per unit + _______) ÷ number of units transferred. Multiple choice question.

opportunity cost of lost sales

Net operating income - (Average operating assets × Minimum required rate of return) = ________________ _____________

residual; income

When a manager accepts a project because the net operating income from the investment exceeds the minimum acceptable profit based on required rate of return, the investment was evaluated based on ________________ ________________ .

residual; income

Any part of an organization whose manager has control over and is accountable for cost, profit, or investments is a(n) _____________ center.

responsibility

Any part of an organization whose manager has control over and is accountable for cost, profit, or investments is a(n) ___________center.

responsibility

Which of the following is not one of the three primary types of responsibility centers? Multiple choice question. sales profit investment cos

sales

When a department has no idle capacity and will interrupt their current level of sales to regular customers, the lowest acceptable transfer price to supply product to another division is ______.

selling price

Using the market price to set transfer prices may not be the best approach when ______.

the selling division has idle capacity

Using the market price to set transfer prices may not be the best approach when ______. Multiple choice question.

the selling division has idle capacity

The price charged when one segment of a company provides goods or services to another segment of the same company is the ______ price.

transfer

The amount that one division charges when it sells goods or services to another division of the same company is called a(n) ______________ _______________.

transfer; price

Operating departments should be charged service departm

variable