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Decentralized Operations(Quick Test)

Author:
Harold Averkamp, CPA, MBA

After you have answered all 20 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers.

Note: Some of the following test questions may not have been covered in the Explanation or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page.

    1. 1. ROI is the acronym for __________ __________ __________.

    2. 2. RI is the acronym for residual __________.

    3. 3. ROCE is the acronym for return on __________ __________.

    4. 4. The benefit foregone by carrying out another alternative is the__________ cost.

    5. 5. A division’s profit minus a charge for its assets or capital employed is its __________ income.

    6. 6. The per unit selling price and purchase price for a product sold between two divisions of the same corporation is known as the__________ price.

    7. 7. Asset turnover is calculated by dividing a division’s net__________ by its average amount of assets.

    8. 8. Goal __________ refers to a decentralized division taking an action that is best for itself and for the entire corporation.

    9. 9. The best transfer price is the company’s __________cost to the point of transfer plus the company’s opportunity cost.

    10. 10. Residual income is expressed as a __________.

    11. 11. A potential project with an ROI of 15% could have a greater residual income than a project having an ROI of 20%.

    12. 12. Residual income includes __________ cost for the capital employed.

    13. Match one of the following centers with items 13 - 18:
      A center may be used more than once, or not at all.

      Cost center
      Revenue center
      Profit center
      Investment center

    14. 13. An assembly line.

    15. 14. Responsible for return on capital employed.

    16. 15. Not responsible for revenues.

    17. 16. Responsible for revenues and expenses, but not investments.

    18. 17. Often a department or part of a department.

    19. 18. Is able to add or eliminate assets.

    20. Use the following information for Questions 19 - 20:
      During its most recent accounting year, Division X of Conglomerate Corporation had a net income before tax of $1,200,000 and residual income before tax of $400,000. Conglomerate Corporation uses 16% as the cost of capital.

    21. 19. The amount of capital employed at Division X was $__________.

    22. 20. Division X earned __________% on its capital employed.

Any questions left unanswered will be marked incorrect.

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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