1. ROI is most appropriately used to evaluate the performance of:
cost center managers.
revenue center managers.
profit center managers.
investment center managers.
both profit center managers and investment center managers.
2. A manufacturer's raw-material purchasing department would likely be classified as a:
3. Controllable costs, as used in a responsibility accounting system, consist of:
only fixed costs.
only direct materials and direct labor.
those costs that a manager can influence in the time period under review.
those costs about which a manager has some knowledge.
those costs that are influenced by parties external to the organization.
4. The amounts charged for goods and services exchanged between two divisions are known as:
standard variable costs.
5. Which of the following is an appropriate base to distribute the cost of building depreciation to responsibility centers?
Number of employees in the responsibility centers.
Budgeted sales dollars of the responsibility centers.
Square feet occupied by the responsibility centers.
Budgeted net income of the responsibility centers.
Total budgeted direct operating costs of the responsibility centers.
6. A responsibility center in which the manager is held accountable for the profitable use of assets and capital is commonly known as a(n):
7. Which of the following bodies oversees audits and auditors, and sanctions firms and individuals for violations of laws and regulations?
American Institute of Certified Public Accountants (AICPA).
American Accounting Association (AAA).
Public Company Accounting Oversight Board (PCAOB).
Financial Accounting Standards Board (FASB).
Accounting Principles Board (APB).
8. Under section 404 of the Sarbanes-Oxley Act, auditors are required to:
Attest to and report on management's assessment of internal controls.
Establish and maintain internal controls for audited companies.
Advise management on its preparation of the Report on Internal Controls.
Evaluate the company's internal control system periodically throughout the year.
All of these.
9. Which of the following costs would be classified as a prevention cost on a quality report?
Out-of-court liability settlements.
10. The Little Rock Division of Classics Companies currently reports a profit of $3.6 million. Divisional invested capital totals $9.5 million; the imputed interest rate is 12%. On the basis of this information, Little Rock's residual income is:
some other amount.
11. The difference between the profit margin controllable by a segment manager and the segment profit margin is caused by:
variable operating expenses.
allocated common expenses.
fixed expenses controllable by the segment manager.
fixed expenses traceable to the segment but controllable by others.
12. The basic idea behind residual income is to have a division maximize its:
earnings per share.
income in excess of a corporate imputed interest charge.
cost of capital.
13. Sand Fly Corporation operates two stores: J and K. The following information relates to J:
Sales revenue $1,300,000
Variable operating expenses 600,000
Traceable to J and controllable by J 275,000
Traceable to J and controllable by others 80,000
J's segment contribution margin is:
14. Which of the following is the correct mathematical expression to derive a company's capital turnover?
Sales revenue / invested capital.
Contribution margin / invested capital.
Income / invested capital.
Invested capital / sales revenue.
Invested capital / income.
15. Weston Company had sales revenue and operating expenses of $5,000,000 and $4,200,000, respectively, for the year just ended. If invested capital amounted to $6,000,000, the firm's ROI was:
some other figure
16. Sunrise Corporation has a return on investment of 15%. A Sunrise division, which currently has a 13% ROI and $750,000 of residual income, is contemplating a massive new investment that will (1) reduce divisional ROI and (2) produce $120,000 of residual income. If Sunrise strives for goal congruence, the investment:
should not be acquired because it reduces divisional ROI.
should not be acquired because it produces $120,000 of residual income.
should not be acquired because the division's ROI is less than the corporate ROI before the investment is considered.
should be acquired because it produces $120,000 of residual income for the division.
should be acquired because after the acquisition, the division's ROI and residual income are both positive numbers.
17. A general calculation method for transfer prices that achieves goal congruence begins with the additional outlay cost per unit incurred because goods are transformed and then
adds the opportunity cost per unit to the organization because of the transfer.
subtracts the opportunity cost per unit to the organization because of the transfer.
adds the sunk cost per unit to the organization because of the transfer.
subtracts the sunk cost per unit to the organization because of the transfer.
adds the sales revenue per unit to the organization because of the transfer.
18. When managers of subunits throughout an organization strive to achieve the goals set by top management, the result is:
planning and control.
delegation of decision making.
19. Which of the following describes the goal that should be pursued when setting transfer prices?
Maximize profits of the buying division.
Maximize profits of the selling division.
Allow top management to become actively involved when calculating the proper dollar amounts.
Minimize opportunity costs.
20. The provisions of section 302 of the Sarbanes-Oxley Act (as originally enacted) require the signing officers of a company to do all of the following except:
Audit the internal controls over financial reporting.
Establish the internal controls over financial reporting.
Maintain the internal controls over financial reporting.
Evaluate the internal controls over financial reporting.
Disclose material weaknesses in the internal controls over financial reporting.