Question : 63. The human resources department of a large company would be : 1229609

 

 

63. The human resources department of a large company would be considered: 
A. A cost center.
B. A profit center.
C. An investment center.
D. A revenue center.

 

 

64. The bookstore of a university would be considered: 
A. A cost center.
B. A profit center.
C. An investment center.
D. A revenue center.

 

 

65. 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.

 

 

66. The measurement most often used to evaluate a business unit organized as an investment center consists of: 
A. Contribution margin stated as a percentage of average total assets.
B. Responsibility margin stated as a percentage of net sales.
C. Contribution margin stated as a percentage of net sales.
D. Responsibility margin stated as a percentage of average total assets.

 

 

Dalton Co. follows a policy of allocating all common costs equally among its profit centers. A partial responsibility income statement for a typical month is shown below:

  

After evaluating these data, Dalton Co. decides to close Profit Center 3. This action eliminates all revenue, variable costs, and fixed costs traceable to Center 3, but eliminates only $35,000 in common fixed costs. Closing Profit Center 3 has no effect upon the responsibility margins of Centers 1 and 2.

 

67. Closing Profit Center 3 should cause Dalton’s monthly operating income to: 
A. Increase by $5,000.
B. Decrease by $15,000.
C. Decrease by $7,000.
D. Change by some other amount.

 

 

68. After the closing of Profit Center 3, the monthly income from operations for Profit Center 1, as measured by Dalton Co. should be approximately: 
A. $25,000.
B. $17,500.
C. $10,000.
D. $80,000.

 

 

69. Company MHF operates subsidiaries in two countries. One of the subsidiaries consumes the output of the other in the production of a good for sale to the public. The company could increase cash flows by: 
A. Using a transfer price based on full cost.
B. Using a transfer price to transfer as much income as possible to the subsidiary located in the lower tax country.
C. Using a transfer price based on market value.
D. Using a transfer price to transfer as much income as possible to the subsidiary located in the higher tax country.

 

 

70. Division managers at Colonial Company are paid a bonus based on the residual income of their respective responsibility centers. Division A sells goods to Division B and to outside customers. The manager of Division B would most likely prefer that transfer prices be based on: 
A. The market value of the goods purchased from Division A.
B. The market value of the goods purchased from Division A plus a fixed percentage.
C. The cost of the goods purchased from Division A.
D. The cost of the goods purchased from Division A plus a fixed percentage.

 

 

71. Responsibility accounting systems should begin with: 
A. A budget by center.
B. A performance report by center.
C. A measure of corporate performance.
D. A company-wide income statement.

 

 

72. 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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