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1. Rutgers-University Accounting 101 PART
5
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Accounting 101 PART5 BUDGETARY CONTROLAND RESPONSIBILITY
ACCOUNTING
91. A profitcenteris
a. a responsibilitycenterthatalwaysreportsaprofit.
b. a responsibilitycenterthatincurscostsand generatesrevenues.
c. evaluatedbythe rate of return earnedonthe investmentallocatedtothe
center.
d. referredtoas a losscenterwhenoperationsdonotmeetthe company's
objectives.
92. Each of the followingare controllablebyaprofitcentermanagerexcept
a. variable costs.
b. sales.
c. indirectfixed costs.
d. all of these optionsare controllable.
93. Directfixedcostsare

2. a. alsocalledcommoncosts.
b. not controllable byaprofitcentermanager.
c. costs that applytomore than one center.
d. deductedfromcontributionmarginonaresponsibilityreport.
94. An indirectfixedcostisalsocalleda
a. commonfixedcost.
b. controllable fixedcost.
c. directfixedcost.
d. traceable fixedcost.
95. All of the followingstatementsaboutaprofitcenterresponsibilityreportare correctexceptthat
a. controllable fixedcostsare deductedfromcontrollable margin.
b. it showsbudgetedandactual controllablerevenuesandcosts.
c. no controllable fixedcostsare notreported.
d. it mayinclude cumulativeyear-to-dateresults.
96. The denominatorinthe formulaforreturnon investmentcalculationis
a. investmentcentercontrollablemargin.
b. dependentonthe specifictype of profitcenter.
c. average investmentcenteroperatingassets.
d. salesforthe period.
97. In the formulaforROI,idle plantassetsare
a. includedinthe calculationof controllablemargin.

3. b. includedinthe calculationof operatingassets.
c. excludedinthe calculationof operatingassets.
d. excludedfromtotal assets.
98. In computingROI,landheldforfuture use
a. will hurtthe performance measurementof aninvestmentcenter'smanager.
b. isimportantinevaluatingthe performance of aprofitcentermanager.
c. isincludedinthe calculationof operatingassets.
d. isconsideredano operatingasset.
99. If an investmentcenterhasa$15,000 controllable marginand$200,000 of sales,whataverage
operatingassetsare neededtohave areturnon investmentof 10%?
a. $20,000.
b. $25,000.
c. $150,000.
d. $200,000.
100. Whichof the followingvaluationsof operatingassetsare notreadilyavailable fromthe
accountingrecords?
a. Cost
b. Bookvalue
c. Market value
d. Both cost andmarketvalue
101. A distinguishingcharacteristicof aninvestment centeristhat
a. revenuesare generatedbysellingandbuyingstocksandbonds.
b. interestrevenue isthe majorsource of revenues.

4. c. the profitabilityof the centerisrelatedtothe fundsinvestedinthe center.
d. it isa responsibilitycenterwhichonlygeneratesrevenues.
102. A measure frequentlyusedtoevaluate the performance of the managerof aninvestment
centeris
a. the amountof profitgenerated.
b. the rate of return onfundsinvestedinthe center.
c. the percentage increase inprofitoverthe previousyear.
d. departmental grossprofit.
103. Returnon investmentiscalculatedbydividing
a. contributionmarginbysales.
b. controllable marginbysales.
c. contributionmarginbyaverage operatingassets.
d. controllable marginbyaverage operatingassets.
104. Whichone of the followingwill notincreasereturnoninvestment?
a. Variable costsare increased
b. An increase insales
c. Average operatingassetsare decreased
d. Variable costsare decreased
105. If an investmentcenterhasgeneratedacontrollable marginof $60,000 and salesof $300,000,
whatis the returnon investmentforthe investmentcenterif average operatingassetswere$500,000
duringthe period?
a. 12%
b. 20%

5. c. 48%
d. 60%
106. The manager of an investmentcentercanimprove ROIbyincreasing
a. average operatingassets.
b. controllable fixedcosts.
c. controllable margin.
d. variable costs.
107. Behavioral principlesincludedinperformance evaluationinclude all of the followingexceptthat
the
a. evaluationshouldbe basedentirelyonmattersthatare controllable bythe
managerbeingevaluated.
b. top managementshouldsupportthe evaluationprocess.
c. evaluationprocessmustallow managerstorespondtotheirevaluation.
d. evaluationshouldidentifyonlypoorperformance.
108. The followinginformationisavailable forLouie Company:
Average operatingassets $500,000
Controllable margin 70,000
Contributionmargin 100,000
Minimumrate of return12%
Louie’sresidual income is
a. $70,000.
b. $40,000.
c. $30,000.
d. $10,000.

6. 109. Residual income isdefinedas
a. contributionmarginlesscontrollable fixedcosts.
b. contributionmarginlessthe minimumrate of returnonaverage operating
assets.
c. controllable marginlessthe minimumrate of returnon average operating
assets.
d. controllable margindividedbyaverage operatingassets.
110. All of the followingare correctstatementsaboutresidual income exceptthat
a. itsgoal isto maximize the total amountof residual income.
b. it ignoresthe factthat one division’soperatingassetsmightbe substantially
lowerthananotherdivision’sassets.
c. it isthe difference betweencontributionmarginandthe minimumrate of
returnon average operatingassets.
d. it evaluatesperformance usingacompany’sminimumrate of return.
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