Question : 71. It beneficial for two related companies to use the cost : 1251718

71. It is beneficial for two related companies to use the cost price approach for transfer pricing when both of the companies operate as cost centers and are not concerned with the revenue.  

72. An activity base is used to charge service department expenses. Match each of the following questions with an activity base.

1. Number of milesMaintenance

2. Number of computers in departmentHuman Resources

3. Number of employeesPayroll Accounting

4. Number of payroll checksPurchasing

5. Number of work ordersPresident’s office

6. Number of advertising campaignsMarketing

7. Equally amongst divisionsTransportation

8. Number of purchase requisitionsInformation Systems

73. Match the following terms with the best definition given below.

1. Earned by profit centers.Residual income

2. Ratio of sales to invested assetsRate of return on investments

3. Income from operations minus minimum acceptable income from operationsProfit margin             

4. Income from operations divided by invested assetsControllable revenues

5. Ratio of income from operations to salesInvestment turnover

74. Which of the following would be most effective in a small owner/manager-operated business? A. Profit centersB. CentralizationC. Investment centersD. Cost centers

75. Businesses that are separated into two or more manageable units in which managers have authority and responsibility for operations are said to be: A. decentralizedB. consolidatedC. diversifiedD. centralized

76. Which of the following is not a disadvantage of decentralized operation? A. Competition among managers decreases profitsB. Duplication of operationsC. Price cutting by departments that are competing in the same product marketD. Top management freed from everyday tasks to do strategic planning

77. Which is the best example of a decentralized operation? A. One owner who prepares plans and makes decisions for the entire company.B. Each unit is responsible for their own operations and decision making.C. In a major company, operating decisions are made by top management.D. None of the above. All are examples of a centralized management.

78. All of the following are advantages of decentralization except: A. Managers make better decisions when closer to the operation of the company.B. Expertise in all areas of the business is difficult, decentralization makes it better to delegate certain responsibilities.C. Each decentralized operation purchases their own assets and pays for operating costs.D. Decentralized managers can respond quickly to customer satisfaction and quality service.

79. Which of the following is not one of the common types of responsibility centers? A. Cost CenterB. Profit CenterC. Investment CenterD. Revenue Center

80. Which of the following is a disadvantage of decentralization? A. Decisions made by one manager may negatively affect the profitability of the entire company.B. Helps retain quality managers.C. Decision making by managers closest to the operations.D. Managers are able to acquire expertise in their areas of responsibility.