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Exam 22: Responsibility Accounting and Transfer Pricing

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Question 51

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Many companies view performance margin as a more useful tool than responsibility margin for evaluating segment managers.This is because:

A) Managers have no control over traceable fixed costs.
B) Performance margin is not affected by the size of the department.
C) Performance margin indicates the change in operating income that would result from closing the department.
D) Performance margin includes only those revenue and costs under the manager's direct control.

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Question 52

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Responsibility accounting systems measures the performance of:

A) The entire company.
B) Each center individually.
C) Both the entire company and each center individually.
D) Neither the entire company nor each center individually.

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Question 53

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Accounting terminology Listed below are seven technical accounting terms introduced or emphasized in this chapter: Each of the following statements may (or may not)describe one of these technical terms.In the space provided beside each statement,indicate the accounting term described,or answer "None" if the statement does not correctly describe any of the terms. ________ (a)Costs that jointly benefit several responsibility centers of the business and that do not vary significantly with changes in sales volume. ________ (b)The amount charged by a responsibility center for the goods it sells to another responsibility center. ________ (c)Used to evaluate the performance of a manager based solely on revenue and costs under the manager's control. ________ (d)A responsibility center of a business that may be evaluated by the return earned on assets. ________ (e)The subtotal in a responsibility income statement that is most useful in evaluating the short-term effects of various marketing strategies on profitability.

Which of the following is not a valid reason for developing responsibility center information?

In the short run,the greatest increase in profitability will result from increasing sales in those profit centers with the:

The primary difference between profit centers and cost centers is that:

Responsibility margin is useful in evaluating the consequences of short-run marketing strategies,while contribution margin is more useful in evaluating long-term profitability.

One purpose of a responsibility accounting system is to evaluate the performance of center managers.