Test bank cost accounting 14e horgren chapter 22

Answer: TRUE Diff: 1 Terms: decentralization Objective: 1 AACSB: Analytical skills 12 The formal management control system includes shared values, loyalties, and mutual commitments among

Trang 1

Cost Accounting, 14e (Horngren/Datar/Rajan)

Chapter 22 Management Control Systems, Transfer Pricing, and Multinational Considerations

Objective 22.1

1) Which of the following is NOT a characteristic of a management control system?

A) It aids and coordinates the process of making decisions

B) It encourages short-term profitability

C) It motivates individuals throughout the organization to act in concert

D) It coordinates forecasting sales and cost-driver activities, budgeting, and measuring and evaluating performance

Answer: B

Diff: 2

Terms: management control system

Objective: 1

AACSB: Reflective thinking

2) The formal management control system includes:

3) Exertion towards a goal is:

4) The degree of freedom to make decisions is:

Trang 2

5) If an oil refinery used refinery down-time as a Balanced Scorecard control measure, it would

represent the perspective

A) financial

B) customer

C) internal business process

D) learning and growth

Answer: C

Diff: 2

Objective: 1

6) If a computer manufacturer used its common stock price as a Balanced Scorecard control measure, it would represent the perspective

A) financial

B) customer

C) internal business process

D) learning and growth

Answer: A

Diff: 2

Objective: 1

7) The goal of a management control system is to improve the collective decisions in an organization in

an economically feasible way

Trang 3

9) Of the four perspectives of the balanced scorecard the customer perspective refers to employee

satisfaction, absenteeism, information systems capabilities, and number of processes with real-time feedback

Answer: FALSE

Explanation: Of the four perspectives of the balanced scorecard the learning and growth perspective refers to employee satisfaction, absenteeism, information systems capabilities, and number of processes with real-time feedback

Diff: 1

Terms: Balanced Scorecard

Objective: 1

10) Motivation is the desire to attain a selected goal combined with the resulting drive or pursuit toward that goal

Answer: TRUE

Diff: 1

Terms: motivation

Objective: 1

11) The essence of decentralization is the freedom for managers at lower levels of the organization to make decisions

Answer: TRUE

Diff: 1

Terms: decentralization

Objective: 1

AACSB: Analytical skills

12) The formal management control system includes shared values, loyalties, and mutual commitments among members of the company, company culture, and norms about acceptable behavior for managers and other employees

Answer: FALSE

Explanation: The informal management control system includes shared values, loyalties, and mutual commitments among members of the company, company culture, and norms about acceptable behavior for managers and other employees

Diff: 2

Objective: 1

13) A well-designed management control system obtains all of its information from within the company Answer: FALSE

Explanation: Well-designed management control systems use information both from within the

company and from outside the company, such as stock price and customer satisfaction measures

Diff: 2

Objective: 1

AACSB: Communication

Trang 4

14) Number of processes with real time feedback would be an example of a Balanced Scorecard control measure from a customer perspective

Answer: FALSE

Explanation: Number of processes with real time feedback would be an example of a Balanced

Scorecard control measure from a learning and growth perspective

Diff: 2

Objective: 1

15) Goal congruence exists when individuals work toward achieving one goal, and groups work toward achieving a different goal

16) Effort is defined as achievement of a goal

17) Effort in terms of management control systems is defined in terms of physical exertion such as a worker producing at a faster rate

18) Management control systems motivate managers and other employees to exert effort through a variety of rewards tied to the achievement of goals

Trang 5

19) For each of the following Balanced Scorecard measures, identify which of the four perspectives (Financial, Customer, Internal Business Process, or Learning and Growth) the measure best represents a On-time delivery of gasoline from refineries to retail stations

f Internal business process

g Learning and growth

h Internal business process

20) Discuss the possible problems a corporation might have if its operations are totally decentralized Answer: (Answers may vary.)

Senior management has the ultimate responsibility for the business In a totally decentralized operation, senior executive management has little say about the conduct of the business Another problem could be caused by the appointment of managers who are not capable of running their business The lack of senior management control might result in problems developing and resulting in even bigger problems before anyone was aware of the incompetent managers

Certain types of activities belong centralized such as gathering information and certain human resource functions

Trang 6

2) An advantage of decentralization is that it:

A) creates greater responsiveness to local needs

B) focuses manager's attention on the organization as a whole

C) does not result in a duplication of activities

D) reduces the cost of gathering information

Answer: A

Diff: 1

Objective: 2

3) A DISADVANTAGE of decentralization is that it:

B) focuses manager's attention on the organization as a whole

C) does not result in a duplication of activities

D) encourages suboptimal decision making

Answer: D

Diff: 1

Objective: 2

4) All of the following are benefits of decentralization EXCEPT that it:

B) decreases management and worker morale

C) leads to quicker decision making

D) sharpens the focus of managers

Answer: B

Diff: 2

Trang 7

5) What is the term used to describe the situation when a manager's decision, which benefits one subunit, is more than offset by the costs to the organization as a whole?

A) suboptimal decision making

B) dysfunctional decision making

C) congruent decision making

D) Both A and B are correct

Answer: D

Diff: 2

Terms: suboptimal decision making, dysfunctional decision making

Objective: 2

AACSB: Ethical reasoning

6) Which of the following statements is FALSE?

A) A centralized structure does not empower employees to handle customer complaints directly B) A decentralized structure forces top management to lose some control over the organization C) Decentralization slows responsiveness to local needs for decision making

D) The extent to which decisions are pushed downward, and the types of decisions that are pushed down, provide a measure of the level of centralization/decentralization in an organization

Answer: C

Diff: 2

Objective: 2

7) Area(s) which is/are usually appropriate for decentralized decision making is(are):

A) sources of supplies and materials

8) The benefits of a decentralized organization are greater when a company:

A) is large and unregulated

B) is facing great uncertainties in their environment

C) has few interdependencies among division

D) All of these answers are correct

Trang 8

9) A benefit of decentralization is that it creates better responsiveness to local needs

Answer: TRUE

Diff: 2

Objective: 2

10) Decentralizaion can sometimes lead to suboptimal decisions

Answer: TRUE

Diff: 2

Objective: 2

11) In a profit center, the manager is accountable for investments, revenues, and costs

12) Suboptimal decision making is also called congruent decision making

13) Surveys indicate that decisions made most frequently at the corporate level are related to sources of supplies and products to manufacture

14) An important advantage of decentralized operations is that it improves corporate control

Answer: FALSE

Explanation: Decentralized operations weaken controls

Diff: 1

Trang 9

15) Autonomy is the freedom for managers at lower levels of the organization to make decisions Answer: FALSE

Explanation: Decentralization is the freedom for managers at lower levels of the organization to make decisions

Diff: 2

Terms: decentralization, autonomy

Objective: 2

16) For each of the following activities, characteristics, and applications, identify whether they can be found in a centralized organization, a decentralized organization, or both types of organizations

a Freedom for managers at lower organizational levels to make decisions b Gathering information may be very expensive

c Greater responsiveness to user needs

d Have few interdependencies among divisions

e Maximum constraints and minimum freedom for managers at lowest levels f Maximization of benefits over costs

g Minimization of duplicate functions

Trang 10

17) The president of Silicon Company has just returned from a week of professional development

courses and is very excited that she will not have to change the organization from a centralized structure

to a decentralized structure just to have responsibility centers However, she is somewhat confused about how responsibility centers relate to centralized organizations where a few managers have most of the authority

Required:

Explain how a centralized organization might allow for responsibility centers

Answer: It does not make any difference what type of organizational structure exists when it comes to defining responsibility centers If a centralized organization desires to hold its managers responsible for their actions, it can design a reporting system that assigns all costs and revenues to their controllable managers It's just that, in a centralized organization, each manager may have more items to control than are reasonably possible

2) Transfer prices should be judged by whether they promote:

A) goal congruence

B) the balanced scorecard method

C) a high level of subunit autonomy in decision making

D) Both A and C are correct

Trang 11

3) A transfer-pricing method leads to goal congruence when managers:

A) always act in their own best interest

B) act in their own best interest and the decision is in the long-term best interest of the manager's subunit C) act in their own best interest and the decision is in the long-term best interest of the company

D) act in their own best interest and the decision is in the short-term best interest of the company

Answer: C

Diff: 3

Terms: transfer price, goal congruence

Objective: 3

4) Negotiated transfer prices are often employed when:

A) market prices are stable

B) market prices are volatile

C) market prices change by a regular percentage each year

D) goal congruence is not a major objective

Answer: B

Diff: 2

Terms: transfer price

Objective: 3

5) The costs used in cost-based transfer prices:

A) are actual costs

B) are budgeted costs

C) can either be actual or budgeted costs

D) are lower than the market-based transfer prices

Answer: C

Diff: 2

Objective: 3

Answer the following questions using the information below:

Penn Oil Corporation has two divisions, Refining and Production The company's primary product is Luboil Oil Each division's costs are provided below:

Production:Variable costs per barrel of oil $ 9

Fixed costs per barrel of oil $ 6

Refining: Variable costs per barrel of oil $30

Fixed costs per barrel of oil $36 The Refining Division has been operating at a capacity of 40,000 barrels a day and usually purchases 25,000 barrels of oil from the Production Division and 15,000 barrels from other suppliers at $60 per barrel

Trang 12

6) What is the transfer price per barrel from the Production Division to the Refining Division, assuming the method used to place a value on each barrel of oil is 180% of variable costs?

7) What is the transfer price per barrel from the Production Division to the Refining Division, assuming the method used to place a value on each barrel of oil is 110% of full costs?

8) Assume 200 barrels are transferred from the Production Division to the Refining Division for a transfer price of $18 per barrel The Refining Division sells the 200 barrels at a price of $120 each to customers What is the operating income of both divisions together?

Trang 13

Greenlawn Corporation has two divisions, Distribution and Production The company's primary product

is fertilizer Each division's costs are provided below:

Production: Variable costs per pound $0.10

Fixed costs per pound $0.50

Distribution: Variable costs per pound $0.06

Fixed costs per pound $0.04 The Distribution Division has been operating at a capacity of 4,000,000 pounds a week and usually purchases 2,000,000 pounds from the Production Division and 2,000,000 pounds from other suppliers at

$0.90 per pound

9) What is the transfer price per barrel from the Production Division to the Distribution Division,

assuming the method used to place a value on each pound of fertilizer is 160% of variable costs?

10) What is the transfer price per barrel from the Production Division to the Distribution Division, assuming the method used to place a value on each pound of fertilizer is 120% of full costs?

Trang 14

11) Assume 100,000 pounds are transferred from the Production Division to the Distribution Division for a transfer price of $0.80 per pound The Distribution Division sells the 100,000 pounds at a price of

$1.10 each to customers What is the operating income of both divisions together?

Trang 15

Calculate the Division operating income for the AlphaShoe Company which manufactures only one type

of shoe and has two divisions, the Sole Division, and the Assembly Division The Sole Division

manufactures soles for the Assembly Division, which completes the shoe and sells it to retailers The Sole Division "sells" soles to the Assembly Division The market price for the Assembly Division to purchase a pair of soles is $40 (Ignore changes in inventory.) The fixed costs for the Sole Division are assumed to be the same over the range of 40,000-100,000 units The fixed costs for the Assembly

Division are assumed to be $14 per pair at 100,000 units

Sole's costs per pair of soles are:

Variable overhead $4

Division fixed costs $2

Assembly's costs per completed pair of shoes are:

Direct materials $12

Variable overhead $2

Division fixed costs $14

12) What is the market-based transfer price per pair of soles from the Sole Division to the Assembly Division?

13) What is the transfer price per pair of soles from the Sole Division to the Assembly Division if the method used to place a value on each pair of soles is 180% of variable costs?

Trang 16

14) What is the transfer price per pair of shoes from the Sole Division to the Assembly Division per pair

of soles if the transfer price per pair of soles is 125% of full costs?

15) Calculate and compare the difference in overall corporate net income between Scenario A and Scenario B if the Assembly Division sells 100,000 pairs of shoes for $120 per pair to customers

Scenario A: Negotiated transfer price of $30 per pair of soles

Scenario B: Market-based transfer price

A) $1,000,000 more net income under Scenario A

B) $1,000,000 of net income using Scenario B

C) $200,000 of net income using Scenario A

D) None of these answers is correct

16) Assume the transfer price for a pair of soles is 180% of total costs of the Sole Division and 40,000 of soles are produced and transferred to the Assembly Division The Sole Division's operating income is: A) $640,000

Trang 17

17) If the Assembly Division sells 100,000 pairs of shoes at a price of $120 a pair to customers, what is the operating income of both divisions together?

Trang 18

Calculate the Division operating income for the Artic Air Company which manufactures only one type

of air conditioner and has two divisions, the Compressor Division, and the Assembly Division The Compressor Division manufactures compressors for the Assembly Division, which completes the air conditioner and sells it to retailers The Compressor Division "sells" compressors to the Assembly Division The market price for the Assembly Division to purchase a compressor is $38.50 (Ignore changes in inventory.) The fixed costs for the Compressor Division are assumed to be the same over the range of 5,000-10,000 units The fixed costs for the Assembly Division are assumed to be $7.50 per unit

Division fixed costs $7.50

Assembly's costs per completed air conditioner are:

Direct materials $150.00

Variable overhead $20.00

Division fixed costs $7.50

18) What is the market-based transfer price per compressor from the Compressor Division to the

19) What is the transfer price per compressor from the Compressor Division to the Assembly Division if the method used to place a value on each compressor is 150% of variable costs?

Trang 19

20) What is the transfer price per compressor from the Compressor Division to the Assembly Division if the transfer price per compressor is 110% of full costs?

21) Assume the transfer price for a compressor is 150% of total costs of the Compressor Division and 1,000 of the compressors are produced and transferred to the Assembly Division The Compressor Division's operating income is:

22) If the Assembly Division sells 1,000 air conditioners at a price of $375.00 per air conditioner to customers, what is the operating income of both divisions together?

Trang 20

Division A sells ground veal internally to Division B, which in turn, produces veal burgers that sell for

$10 per pound Division A incurs costs of $1.50 per pound while Division B incurs additional costs of

24) Which of the following formulas correctly reflects the company's operating income per pound? A) $10.00 - ($1.50 + $5.00) = $3.50

25) A transfer pri ce is the price one subunit charges for a product or service supplied to another subunit of the same organization

Answer: TRUE

Diff: 1

Objective: 3

26) The choice of a transfer-pricing method has minimal effect on the allocation of company-wide operating income among divisions

Answer: FALSE

Explanation: The choice of a transfer-pricing method has a large effect

Diff: 2

Trang 21

27) No matter how low the transfer price, the manager of the selling division should sell the division's product to other company divisions in the interests of overall company profitability

28) The costs used in cost-based transfer prices can only be budgeted costs

29) A perfect l y com petiti ve market exists when there is a homogeneous product with buying prices equal to selling prices and no individual buyers or sellers can affect those prices by their own actions

Trang 22

30) For each of the following, identify whether it BEST relates to market-based, cost-based, negotiated,

or all types of transfer pricing

a Bargaining between selling and buying units

b Budgeted costs

c 145% of full costs

d Internal product transfers are required if goods are available internally

e Manufacturing costs plus marketing costs plus distribution costs

plus customer service costs f Prices listed in a trade journal

g Selling price less normal sales commissions

h Variable manufacturing cost plus a markup

Trang 23

31) For each of the following statements regarding the satisfaction of transfer pricing criteria, identify whether you would expect the transfer pricing method to meet the criteria Provide a yes, no, or sometimes for each situation

a Market-Based transfer pricing achieves goal congruence

b Cost-Based transfer pricing achieves goal congruence

c Negotiated transfer pricing achieves goal congruence

d Market-Based transfer pricing motivates management effort

e Cost-Based transfer pricing motivates management effort

f Negotiated transfer pricing motivates management effort

g Market-Based transfer pricing is useful for evaluating subunit performance h Cost-Based transfer pricing is useful for evaluating subunit performance i Negotiated transfer pricing is useful for evaluating subunit performance j Market-Based transfer pricing preserves subunit autonomy

k Cost-Based transfer pricing preserves subunit autonomy

l Negotiated transfer pricing preserves subunit autonomy

Định dạng
Số trang	46
Dung lượng	532,3 KB