Gen Combo Fundamentals Of Cost Accounting; Connect Access Card
Gen Combo Fundamentals Of Cost Accounting; Connect Access Card
6th Edition
ISBN: 9781260848700
Author: William N. Lanen Professor, Shannon Anderson Associate Professor, Michael W Maher
Publisher: McGraw-Hill Education
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Chapter 14, Problem 11CADQ
To determine

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Differentiate between a cost center, profit center, and investment center. What is the major shortcoming of using operating income as a performance measure for investment centers? Why should the factors under the control of the investment center manager (revenues, expenses, and invested assets) be considered in computing the return on investment? In a decentralized company in which the divisions are organized as investment centers, how could a division be considered the least profitable, even though it earned the largest amount of operating income? Does the concept of decentralization--top managers allowing middle and lower-level managers to make decisions--have application to God's plan for us?  In other words, does God make decisions for us or does he allow us to make decisions in our own lives?  Is this good or bad? How does using the return on investment facilitate comparability between divisions of decentralized companies?
Image attached below. Questions 1. Explain how the manager if each division will react to the opportunity if their performance is evaluated against residual income. 2. Explain how the manager of each division will react to the opportunity if their performance is evaluated against ROI. 3. Are ROI and residual income appropriate for evaluating the performance of the divisional managers. 4. What additional measures could be used for performance evaluation.
Which of the following describes the goal that should be pursued when setting transfer prices? Allow top management to become actively involved when calculating the proper dollar amounts. Minimize opportunity costs. Maximize profits of the buying division. Establish incentives for autonomous division managers to make decisions that are in the overall organization's best interests (i.e., goal congruence). Maximize profits of the selling division.

Chapter 14 Solutions

Gen Combo Fundamentals Of Cost Accounting; Connect Access Card

Ch. 14 - Prob. 11CADQCh. 14 - What problems might there be if the same methods...Ch. 14 - Prob. 13CADQCh. 14 - The chapter identified some problems with ROI-type...Ch. 14 - Failure to invest in projects is not a problem...Ch. 14 - How would you respond to the following comment?...Ch. 14 - Prob. 17CADQCh. 14 - Prob. 18CADQCh. 14 - Prob. 19CADQCh. 14 - Prob. 20CADQCh. 14 - Prob. 21CADQCh. 14 - Compute Divisional Income Arlington Clothing,...Ch. 14 - Compute Divisional Income Refer to Exercise 14-22....Ch. 14 - Computing Divisional Income: Incomplete...Ch. 14 - Compute RI and ROI The Campus Division of...Ch. 14 - Prob. 26ECh. 14 - Compare Alternative Measures of Division...Ch. 14 - Comparing Business Units Using ROI Back Mountain...Ch. 14 - Comparing Business Units Using Residual Income...Ch. 14 - Prob. 30ECh. 14 - Universal Electronics, Inc. (UEI), which started...Ch. 14 - Comparing Business Units Using Residual...Ch. 14 - Comparing Business Units Using Economic Value...Ch. 14 - Impact of New Asset on Performance Measures The...Ch. 14 - Refer to the data in Exercise 14–34. The division...Ch. 14 - Refer to the information in Exercises 14–34 and...Ch. 14 - Impact of an Asset Disposal on Performance...Ch. 14 - Impact of an Asset Disposal on Performance...Ch. 14 - Compare Historical Cost, Net Book Value to Gross...Ch. 14 - Prob. 40ECh. 14 - Prob. 41ECh. 14 - Effects of Current Cost on Performance...Ch. 14 - Comparing Business Units Using Divisional Income,...Ch. 14 - Comparing Business Units Using Economic Value...Ch. 14 - Prob. 45PCh. 14 - Equipment Replacement and Performance Measures...Ch. 14 - Prob. 47PCh. 14 - Prob. 48PCh. 14 - Prob. 49PCh. 14 - Prob. 50PCh. 14 - Prob. 51PCh. 14 - Evaluate Performance Evaluation System: Behavioral...Ch. 14 - ROI, EVA, and Different Asset Bases Hys is a...Ch. 14 - Economic Value Added Bisbee Health Products...Ch. 14 - Prob. 55PCh. 14 - Prob. 56PCh. 14 - Refer to the information in Exercise 14-39. Assume...Ch. 14 - Refer to the information in Exercise 14-42. Assume...
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