Economic value added (EVA) is residual income adjusted for NOPAT. taxes and depr
ID: 2354584 • Letter: E
Question
Economic value added (EVA) is residual income adjusted forNOPAT.
taxes and depreciation.
transfer prices.
accounting distortions.
2. The advantage of using a negotiated transfer price instead of a cost-based transfer price is that:
managers should be able to consider opportunity costs in a negotiated price.
a negotiated transfer price provides managers greater autonomy than a cost-based transfer price.
a negotiated transfer price will get a good result if managers act rationally.
All of the above.
3. Return on investment can be improved by
increasing the profit margin.
generating more sales for each dollar invested.
Both A and B are correct.
Neither A nor B is correct.
4. Consider the following information for Cross and Son, Inc.
How much is the return on investment for 2012?
6.67%
4.78%
5.60%
6.39%
5. When an efficient market exists, the market price will generally be the best transfer price.
True
False
6. Most service departments, such as machine maintenance and janitorial services, are examples of
investment centers.
profit centers.
cost centers.
transfer centers.
7. The balanced scorecard challenges managers to:
focus on the single most important measure to the company.
perform on a variety of dimensions simultaneously.
look forward as well as backward.
Both B and C.
The following data pertains to the dress division of the Cross and Allan Company:
Residual income/(loss) is equal to:
$10,000
$24,000
$45,000
$55,000
9. A transfer price is the price that is used to value transfers of goods and services
from one subunit of a company to another subunit in the company.
from Work in Process Inventory to Finished Goods Inventory in a standard costing system.
from a subunit of the company to a wholesaler or retailer.
D. back to one of the company’s suppliers.
10. Which of the following is not a disadvantage of a decentralized organization?
Managers’ goals may not be the same as the goals of the company as a whole.
Some activities may be duplicated and incur unnecessary costs.
Managers with the best information make the appropriate decisions.
All of the above are disadvantages of a decentralized organization.
Explanation / Answer
Economic value added (EVA) is residual income adjusted for
NOPAT.
taxes and depreciation.
transfer prices.
accounting distortions.
2. The advantage of using a negotiated transfer price instead of a cost-based transfer price is that:
managers should be able to consider opportunity costs in a negotiated price.
a negotiated transfer price provides managers greater autonomy than a cost-based transfer price.
a negotiated transfer price will get a good result if managers act rationally.
All of the above.
3. Return on investment can be improved by
increasing the profit margin.
generating more sales for each dollar invested.
Both A and B are correct.
Neither A nor B is correct.
4. Consider the following information for Cross and Son, Inc.
How much is the return on investment for 2012?
6.67%
4.78%
5.60%
6.39%
5. When an efficient market exists, the market price will generally be the best transfer price.
True
False
6. Most service departments, such as machine maintenance and janitorial services, are examples of
investment centers.
profit centers.
cost centers.
transfer centers.
7. The balanced scorecard challenges managers to:
focus on the single most important measure to the company.
perform on a variety of dimensions simultaneously.
look forward as well as backward.
Both B and C.
The following data pertains to the dress division of the Cross and Allan Company:
Residual income/(loss) is equal to:
$10,000
$24,000
$45,000
$55,000
9. A transfer price is the price that is used to value transfers of goods and services
from one subunit of a company to another subunit in the company.
from Work in Process Inventory to Finished Goods Inventory in a standard costing system.
from a subunit of the company to a wholesaler or retailer.
D. back to one of the company’s suppliers.
10. Which of the following is not a disadvantage of a decentralized organization?
Managers’ goals may not be the same as the goals of the company as a whole.
Some activities may be duplicated and incur unnecessary costs.
Managers with the best information make the appropriate decisions.
All of the above are disadvantages of a decentralized organization.
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