Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
14th Edition
ISBN: 9781337541398
Author: Carl Warren; James M. Reeve; Jonathan Duchac
Publisher: Cengage Learning
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Textbook Question
Chapter 9, Problem 5DQ
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 income from operations?
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In a decentralized company in which the divisions are organized as investment centers, how could a dicision be considered the least profitable even though it earned the largest amount of income from operations?
Differentiate between centralized and decentralized operations.
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 income from operations?
5. 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 income from operations?
6. How does using the return on investment facilitate comparability between divisions of decentralized companies?
Chapter 9 Solutions
Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
Ch. 9 - Differentiate between centralized and...Ch. 9 - Differentiate between a profit center and an...Ch. 9 - Prob. 3DQCh. 9 - What is the major shortcoming of using operating...Ch. 9 - In a decentralized company in which the divisions...Ch. 9 - How does using the return on investment facilitate...Ch. 9 - Prob. 7DQCh. 9 - Prob. 8DQCh. 9 - Prob. 9DQCh. 9 - When using the negotiated price approach to...
Ch. 9 - Budgetary performance for cost center Vinton...Ch. 9 - Support department allocations The centralized...Ch. 9 - Prob. 3BECh. 9 - Profit margin, investment turnover, and ROI Briggs...Ch. 9 - Residual income The Commercial Division of Galena...Ch. 9 - Prob. 6BECh. 9 - Prob. 1ECh. 9 - Prob. 2ECh. 9 - For each of the following support departments,...Ch. 9 - Prob. 4ECh. 9 - Service department charges In divisional income...Ch. 9 - Service department charges and activity bases...Ch. 9 - Prob. 7ECh. 9 - Prob. 8ECh. 9 - Prob. 9ECh. 9 - Prob. 10ECh. 9 - Prob. 11ECh. 9 - Prob. 12ECh. 9 - Prob. 13ECh. 9 - Prob. 14ECh. 9 - Prob. 15ECh. 9 - Prob. 16ECh. 9 - Prob. 17ECh. 9 - Prob. 18ECh. 9 - Prob. 19ECh. 9 - Prob. 20ECh. 9 - Prob. 1PACh. 9 - Profit center responsibility reporting for a...Ch. 9 - Prob. 3PACh. 9 - Effect of proposals on divisional performance A...Ch. 9 - Divisional performance analysis and evaluation The...Ch. 9 - Prob. 6PACh. 9 - Prob. 1PBCh. 9 - Prob. 2PBCh. 9 - Prob. 3PBCh. 9 - Prob. 4PBCh. 9 - Prob. 5PBCh. 9 - Prob. 6PBCh. 9 - Prob. 1ADMCh. 9 - Prob. 2ADMCh. 9 - Prob. 3ADMCh. 9 - Prob. 1TIFCh. 9 - Prob. 2TIFCh. 9 - Communication The Norse Division of Gridiron...
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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?arrow_forwardIn a business where the divisions are organized as investment centers, discuss how a division that generates the largest dollar amount of profit among all divisions, could be considered the least profitableamong all divisions?arrow_forwardWhat are the instances that the return of investment of a division is significantly larger than the return of investment of the entire company? And, why?arrow_forward
- Differentiate between centralized and decentralized operations. 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 income from operations? Why would a firm use a balanced scorecard in evaluating divisional performance?arrow_forwardHow does using the return on investment facilitate comparability between divisions of decentralized companies?arrow_forward(a) Explain how return on investment might lead a divisional manager to reject new investments that could be profitable for the company as a whole. (b) How can this disadvantage be overcome?arrow_forward
- Which of the following is not an objective or potential advantage of transfer pricing? A) A realistic measurement of performance of each division B) A reduction in goal congruence between divisions and overall company C) More autonomy and motivation for divisional managers D) The maximisation of company profitsarrow_forwardUpper management of a growing company has decided its organization is too large to operate as one unit. In fact, some in upper management believe parts of the company are not as profitable as they should be. They have decided to create different segments of the company based on similar groups of products manufactured and have appointed managers of each of these segments. Which of the following would be a good reason for upper management to make this decision? 1. Each segment manager can be held responsible for income generated by segment assets. II. Duplication of work across the organization will decline. III. Segment managers have better information to make decisions than upper management. IV. Upper management can build future leaders by developing segment managers' decision-making skills. V. Communication across the company will be strengthened. O All statements (I-V) are good reasons II, III, IV O I, II, IV, V O I, III, IV OLILVarrow_forwardIn a decentralized accounting system, a company that gives a manager responsibility over revenues, costs, and investment in assets is organized as what type of responsibility center? Group of answer choices cost center profit center investment center none of thesearrow_forward
- Large corporations often have many product-based divisions that cater to different markets. Why each division may need its own cost of capital and why the divisional cost of capital may be different between two divisions.arrow_forwardWhich of the following measures the profitability of a division relative to the size of its investment in capital assets? A. residual Income (RI) B. sales margin C. return on investment (ROI) D. economic value added (EVA)arrow_forwardHow does using the return on investment facilitate comparability between divisions of decentralized companies?arrow_forward
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