Murillo 4-5 ULO A Check 1&2 PDF

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Let’s Che ck Activity 1. Please encircle the letter under each item that best reflects your answer. Which of the following is not an example of a responsibility center? a. investment center c. contribution center b. cost center d. revenue center A manufacturer’s raw-material purchasing department wo...

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Let’s Check Activity 1. Please encircle the letter under each item that best reflects your answer. 1. Which of the following is not an example of a responsibility center? a. investment center

c. contribution center

b. cost center

d. revenue center

2. A manufacturer’s raw-material purchasing department would likely be classified as a a. cost center

c. contribution center

b. profit center d. investment center

3. The telemarketing department of a residential remodeling company would most likely be evaluated as a a. investment center

c. profit center

b. cost center

d. revenue center

4. If the head of a hotel’s food and beverage operation is held accountable for revenues and costs, the food and beverage operation would be considered a(n) a. cost center b. revenue center

c. profit center d. contribution center

5. Decentralized firms can delegate authority by structuring an organization into responsibility centers. Which of the following organizational segments is most likely a totally independent, standalone business where managers are expected to “make it on their own”? a. investment center

c. contribution center

b. profit center

d. revenue center

6. A responsibility center in which the manager is held accountable for the profitable use of assets or capital is commonly known as a(n) a. cost center b. revenue center

c. profit center d. investment center

7. The Asian Division of a multinational organization would likely be classified as a(n) a. contribution center

c. revenue center

b. investment center

d. profit center

8. Which of the following would have a low likelihood of being organized as a profit center? a. A movie theater of a company that operates a chain of theaters. b. A maintenance department that charges a chain of theaters. c. The billing department of an Internet Service Provider (ISP). d. The mayor’s office in a large city. e. Both c and d above.

9. Which of the following types of responsibility centers has accountability for revenues a. cost center and investment center b. investment center and profit center c. profit center and cost center d. revenue center and cost center

10. Responsibility accounting systems strive to a. provide information to managers. b. place blame on guilty individuals.

c. hold managers accountable for both controllable and noncontrollable costs. d. provide information so that managers can make decisions that are in the best interest of their individual centers rather than in the best interests of the firm as a whole.

11. The basic purpose of responsibility accounting system is a. budgeting c. authority b. motivation

d. variance analysis

12. When managers of subunits throughout an organization strive to achieve the goals set by top management, the result is a. planning and control

c. responsibility accounting

b. goal congruence

d. strategic control

13. Which of the following is most likely to be a disadvantage of decentralization? a. Lower-level employees will develop less rapidly than in a centralized organization. b. Lower-level employees will complain of not having enough to do. c. Top management will have less time available to devote to unique problems. d. Lower-level managers may make conflicting decisions.

14. The CEO of a rapidly growing high-technology firm has exercised centralized authority over all corporate functions. Because the company now operates in four states, the CEO is considering the advisability of decentralizing operational control over production and sales. Which of the following conditions probably will result from and be a valid reason for decentralizing? a. Greater local control over compliance with federal regulations

b. More efficient use of headquarters staff officials and specialist c. Quicker and better operating decisions d. Greater economies in purchasing 15. A successful responsibility accounting reporting system is dependent upon a. the correct allocation of controllable variable costs. b. identification of the management level at which all costs are controllable. c. the proper delegation of responsibility and authority. d. a reasonable separation of costs into their fixed and variable components since fixed costs are not controllable and must be eliminated from the responsibility report.

Let’s Check Activity 2. Read each statement. On the space provided, write T if you believe the statement is true or F if false. __T___1. Transfer prices can be used to promote goal congruence among operating segments of an organization. __F___2. In computing a transfer price, the maximum price should be no higher than the highest market price at which the buying segment can obtain the good or service externally. __T___3. In computing a transfer price, the minimum price should be no lower than the incremental costs associated with the goods plus the opportunity cost of the facilities used. __T___4. One of the main factors to consider when using a cost-based transfer price is whether to use actual or standard costs. __T___5. When using a negotiated transfer price, a determination must be made if comparable substitutes are available externally. __T___6. Market based transfer prices are most effective for common high-cost and high-volume standardized services.

__F___7. Cost-based transfer prices are most effective for common high-cost and high-volume standardized services. __F___8. Market based transfer prices are most appropriate customized high-volume and high-cost services. __F___9. Negotiated transfer prices are most appropriate for low cost and low volume services. __T__10. Sub-optimization occurs when a manager of a cost center focuses on the goals of the cost center rather than on the goals of the organization as a whole....