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Exam 11: Responsibility Accounting Systems

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Question 61

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Siegrist Products, Incorporated has a Pump Division that manufactures and sells a number of products, including a standard pump that could be used by another division in the company, the Pool Products Division, in one of its products. Data concerning that pump appear below: The Pool Products Division is currently purchasing 12,000 of these pumps per year from an overseas supplier at a cost of $54 per pump. Assume that the Pump Division has enough idle capacity to handle all of the Pool Products Division's needs. What should be the minimum acceptable transfer price for the pumps from the standpoint of the Pump Division?

A) $47 per unit
B) $60 per unit
C) $36 per unit
D) $54 per unit

E) B) and C)
F) A) and C)

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Question 62

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The following data are for the Akron Division of Consolidated Rubber, Incorporated: For the past year, the margin used in return on investment calculations was:

A) 6.00%
B) 8.67%
C) 10.00%
D) 8.00%

E) All of the above
F) A) and C)

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Question 63

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The Consumer Products Division of Goich Corporation had average operating assets of $800,000 and net operating income of $81,300 in May. The minimum required rate of return for performance evaluation purposes is 10%.What was the Consumer Products Division's residual income in May?

Dacker Products is a division of a major corporation. The following data are for the most recent year of operations: The division's margin used to compute return on investment is closest to:

Stokan Products, Incorporated, has a Antennae Division that manufactures and sells a number of products, including a standard antennae that could be used by another division in the company, the Aircraft Products Division, in one of its products. Data concerning that antennae appear below: The Aircraft Products Division is currently purchasing 5,000 of these antennaes per year from an overseas supplier at a cost of $57 per antennae.What is the maximum price that the Aircraft Products Division should be willing to pay for antennaes transferred from the Antennae Division?

Wigelsworth Products, Incorporated, has a Sensor Division that manufactures and sells a number of products, including a standard sensor. Data concerning that sensor appear below: The Safety Products Division of Wigelsworth Products, Incorporated needs 6,000 special heavy-duty sensors per year. The Sensor Division's variable cost to manufacture and ship this special sensor would be $32 per unit. Because these special sensors require more manufacturing resources than the standard sensor, the Sensor Division would have to reduce its production and sales of standard sensors to outside customers from 89,000 units per year to 79,400 units per year. From the standpoint of the Sensor Division, what is the minimal acceptable transfer price for the special sensors for the Safety Products Division?

Given the following data: Return on investment (ROI) is:

Division R of Harris Corporation has the capacity for making 40,000 wheel sets per year and regularly sells 36,000 each year on the outside market. The regular selling price on the outside market is $89 per wheel set, and the variable production cost per unit is $56. Division S of Harris Corporation currently buys 6,000 wheel sets (of the kind made by Division R) yearly from an outside supplier at a price of $85 per wheel set. If Division S were to buy the 6,000 wheel sets it needs annually from Division R at $83 per wheel set, the change in annual net operating income for the company as a whole, compared to what it is currently, would be:

Division C makes a part that it sells to customers outside of the company. Data concerning this part appear below: Division D of the same company would like to use the part manufactured by Division C in one of its products. Division D currently purchases a similar part made by an outside company for $39 per unit and would substitute the part made by Division C. Division D requires 5,810 units of the part each period. Division C has ample excess capacity to handle all of Division D's needs without any increase in fixed costs and without cutting into outside sales. What is the lowest acceptable transfer price from the standpoint of the selling division?

All charges for services computed using budgeted rather than actual rates should be removed from an operating department's performance report.

Levar Corporation has two operating divisions-a Consumer Division and a Commercial Division. The company's Order Fulfillment Department provides services to both divisions. The variable costs of the Order Fulfillment Department are budgeted at $31 per order. The Order Fulfillment Department's fixed costs are budgeted at $288,000 for the year. The fixed costs of the Order Fulfillment Department are determined based on the peak period orders. At the end of the year, actual Order Fulfillment Department variable costs totaled $216,867 and fixed costs totaled $282,600. The Consumer Division had a total of 1,840 orders and the Commercial Division had a total of 4,895 orders for the year. For purposes of evaluation performance, how much Order Fulfillment Department cost should be charged to the Commercial Division at the end of the year?

For performance evaluation purposes, any variance over budgeted fixed costs in a service department should be the responsibility of the service department and should not be charged to the departments that use the service.

Fregozo Products, Incorporated, has a Connector Division that manufactures and sells a number of products, including a standard connector that could be used by another division in the company, the Transmission Division, in one of its products. Data concerning that connector appear below: The Transmission Division is currently purchasing 8,000 of these connectors per year from an overseas supplier at a cost of $45 per connector.Assume that the Valve Division is selling all of the valves it can produce to outside customers. Also assume that $10 in variable expenses can be avoided on transfers within the company due to reduced shipping and selling costs. What should be the minimum acceptable transfer price for the valves from the standpoint of the Valve Division?

Dacker Products is a division of a major corporation. The following data are for the most recent year of operations: The division's return on investment (ROI) is closest to:

Division S of Kracker Company makes a part that it sells to other companies. Data on that part appear below: Division B, another division of Kracker Company, presently is purchasing 10,000 units of a similar product each period from an outside supplier for $28 per unit, but would like to begin purchasing from Division S.Suppose that Division S has ample idle capacity to handle all of Division B's needs without any increase in fixed costs or cutting into sales to outside customers. If Division S refuses to accept a transfer price of $28 or less and Division B continues to buy from the outside supplier, the company as a whole will:

Anguiano Incorporated reported the following results from last year's operations: The company's average operating assets were $5,000,000. Last year's return on investment (ROI) was closest to:

Division A makes a part with the following characteristics: Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $24 each.Suppose that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into sales to outside customers. If Division A refuses to accept the $24 price internally and Division B continues to buy from the outside supplier, the company as a whole will be:

Which of the following will not result in an increase in return on investment (ROI) , assuming other factors remain the same?

Youns Incorporated reported the following results from last year's operations: The company's average operating assets were $5,000,000.At the beginning of this year, the company has a $1,400,000 investment opportunity that involves sales of $2,800,000, fixed expenses of $616,000, and a contribution margin ratio of 30% of sales. If the company pursues the investment opportunity and otherwise performs the same as last year, the combined turnover for the entire company will be closest to:

Agustin Industries is a division of a major corporation. Data concerning the most recent year appears below: The division's return on investment (ROI) is closest to: