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Accounting Chapter 23

Which of the following would be most effective in a small owner/manager-operated business?
Centralization
Businesses that are separated into two or more manageable units in which managers have authority and responsibility for operations are said to be:
Decentralized
All of the following are advantages of decentralization except:
Each decentralized operation purchases their own assets and pays for operating costs.
Which of the following is a disadvantage of decentralization?
Decisions made by one manager may negatively affect the profitability of the entire company
Which of the following expenses incurred by the sporting goods department of a department store is a direct expense?
Insurance on inventory of sporting goods
Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are termed:
Direct Expenses
Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are termed:
Total service department charges are $1,025,000
The costs of services charged to a profit center on the basis of its use of those services are called:
Service department charges.
Division X reported income from operations of $975,000 and total service department charges of $575,000. Therefore:
Income from operations before service department charges was $1,550,000
Income from operations for Division Z is $250,000, total service department charges are $400,000 and operating expenses are $2,266,000. What are the revenues for Division Z?
$2,916,000
Income from operations for Division K is $220,000, and income from operations before service department charges is $975,000. Therefore:
Total service department charges are $755,000
The following data are taken from the management accounting reports of Dulcimer Co.:

If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that

Division A’s manager is given the bonus.
Managers of what type of decentralized units have authority and responsibility for revenues, costs, and assets invested in the unit?
Investment Center
A responsibility center in which the department manager is responsible for costs, revenues, and assets for a department is called
Investment Center
In an investment center, the manager has the responsibility for and the authority to make decisions that affect:
Not only costs and revenues, but also assets invested in the center
In an investment center, the manager has responsibility and authority for making decisions that affect:
Costs, revenues, and assets.
Identify the formula for the rate of return on investment.
Income From Operations/Invested Assets
The excess of divisional income from operations over a minimum amount of divisional income from operations is termed:
Residual income

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