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Question(s) / Instruction(s):

A responsibility center in which the department manager is responsible for costs, revenues, and assets for a department is called:

a)            An operating center

b)            A cost center

c)            An investment center

d)            A profit center


Question 12:

Which one of the following is NOT a measure that management can use in evaluating and controlling investment center performance?

a)            Negotiated price

b)            Income from operations

c)            Rate of return on investment

d)            Residual income


Question 13:

Division R of O'Murray Company has sales of $200,000, cost of goods sold of $120,000, operating expenses of $58,000, and invested assets of $125,000. What is the profit margin for Division R?

a)            11%

b)            9.15%

c)            20%

d)            8.8%

Question 14:

Which of the following is considered an advantage of decentralization?

a)            Decisions made by different managers all positively affect the overall profitability of the company

b)            Decentralized decision making provides excellent training for managers

c)            all of the above

d)            Assets and costs are duplicated across operating divisions


Question 15:

The centralized Help Desk of Hayman Company has expenses of $140,000.  The department has provided a total of 5,000 hours of service for the period.  Computer Division has used 2,000 hours of Help Desk service during the period, and Peripheral Division has used 3,000 hours of Help Desk service.  How much the Peripheral Division should be charged?

a)            $56,000

b)            $60,000

c)            $90,000

d)            $84,000


Question 16:

Service department charges are used in which of the following responsibility centers?

a)            Investment center

b)            Profit center

c)            Cost center

d)            Data center


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