Advanced Cost Accounting Devry University Week 7 Quiz

1. (TCO 8) Which of the following is not a benefit associated with decentralization? (Points : 6)

       Quicker decision making
       Increased motivation of subunit managers
       Increased competition among managers
       Greater responsiveness to local needs

2. (TCO 8) The San Jose Manufacturing Company has two divisions in Kansas—the Holton Division and the Derby Division. Currently, Derby buys a part (10,000 units) from Holton for $16 per unit. Holton has purchased new equipment and wants to increase the price to Derby to $18 per unit. The controller of Derby claims that she cannot afford to go that high, as it will decrease the division’s profit to near zero. Derby can buy the part from an outside supplier for $16 per unit. The incremental costs per unit that San Jose incurs to produce each unit are Holton’s variable cost of $12. Fixed costs per unit to Holton with the recent purchase of equipment are $5.
Holton has no alternative uses for its facilities. Should Derby continue to buy from Holton or buy from the external supplier?
Company as a whole/Derby Division only (Points : 6)

       Buy from external supplier/ Buy from external supplier
       Buy from external supplier/ Buy from Holton Division
       Buy from Holton Division/ Buy from Holton Division
       Buy from Holton Division/ Buy from external supplier

3. (TCO 8) When calculating performance measures, it is best to use (Points : 6)

       steady improvement against targets.
       gross book value asset measurement.
       historical cost asset measurement.
       current cost asset measurement.

4. (TCO 8) Information pertaining to the Woodsy Creek Division of MO Corporation for 20XX follows.

Revenues

$950,000

Variable costs

575,000

Traceable fixed costs

336,500

Average invested capital

350,000

Imputed interest rate

10%

The return on sales (ROS), a component of the DuPont method of profitability analysis, was (rounded to the nearest percent) (Points : 6)

       11%.
       40%.
       0.4%.
       4%.

5. (TCO 9) The CEO of a rapidly growing high-technology firm has centralized authority over all corporate functions. Because the company now operates in four geographically dispersed locations, the CEO is considering the advisability of decentralizing control over production and sales. Which of the following conditions will result from and be a valid reason for decentralizing?(Points : 6)

       Greater local control over compliance with government regulations
       More efficient use of headquarters staff officials and specialists
       Quicker and better operating decisions
       Greater economies of purchasing