ACC650
Module 6 - Quiz - Internal Control and Transfer Pricing
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1) 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.
Establish incentives
for autonomous division managers to make decisions that are in the overall
organization's best interests (i.e., goal congruence).
Minimize opportunity
costs.
2) The amounts
charged for goods and services exchanged between two divisions are known as:
a. opportunity
costs.
transfer prices.
standard variable
costs.
residual prices.
target prices.
3) Which of the
following is an appropriate base to distribute the cost of building
depreciation to responsibility centers?
a. 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
4) 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).
5) 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:
a. 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.
6) 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:
a. 13.33%.
83.33%.
120.00%.
750.00%.
some other figure.
7) The basic
idea behind residual income is to have a division maximize its:
a. earnings
per share.
income in excess of a
corporate imputed interest charge.
cost of capital.
cash flows.
invested capital.
8) Which of the
following costs would be classified as a prevention cost on a quality report?
a. Reliability
engineering.
Materials inspection.
Rework.
Warranty repairs.
Out-of-court
liability settlements.
9) A
manufacturer's raw-material purchasing department would likely be classified as
a:
a. cost
center.
revenue center.
profit center.
investment center.
contribution center.
10) Which of the
following is the correct mathematical expression to derive a company's capital
turnover?
a. Sales
revenue / invested capital.
Contribution margin /
invested capital.
Income / invested
capital.
Invested capital /
sales revenue.
Invested capital / income.
11) When managers
of subunits throughout an organization strive to achieve the goals set by top
management, the result is:
a. goal
congruence.
planning and control.
responsibility
accounting.
delegation of
decision making.
strategic control.
12) 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:
a. 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.
13) ROI is most
appropriately used to evaluate the performance of:
a. cost center
managers.
revenue center
managers.
profit center
managers.
investment center
managers.
both profit center
managers and investment center managers.
14) 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
a. 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.
15) Under section
404 of the Sarbanes-Oxley Act, auditors are required to:
a. 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.
16) Controllable
costs, as used in a responsibility accounting system, consist of:
a. 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.
17) 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
Fixed expenses:
Traceable to J and controllable by J 275,000
Traceable to J and controllable by others 80,000
J's segment contribution margin is:
a. $345,000.
$425,000.
$620,000.
$700,000.
$745,000.
18) A
responsibility center in which the manager is held accountable for the
profitable use of assets and capital is commonly known as a(n):
a. cost
center.
revenue center.
profit center.
investment center.
contribution center.
19) The
difference between the profit margin controllable by a segment manager and the
segment profit margin is caused by:
a. variable
operating expenses.
allocated common
expenses.
fixed expenses
controllable by the segment manager.
fixed expenses
traceable to the segment but controllable by others.
sales revenue.
20) 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:
a. $432,000.
$708,000.
$1,140,000.
$2,460,000.
some other amount.
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