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Chapter 22: Performance Management and Responsibility Accounting

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Financial & Managerial Accounting
Pages: 986 - 1031

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110 Questions for Chapter 22: Performance Management and Responsibility Accounting

  1. Why is overhead allocation under ABC usually more accurate than either the plant-wide overhead allocation method or the departmental overhead allocation method?

    Found on Page 986
  2. Compute return on investment for each of the divisions below (each is an investment center). Comment on the relative performance of each investment center.

    Found on Page 1014
  3. Google reports costs in financial statements. If plantwide overhead rates are allowed for reporting costs to external users, why might a company choose to use a more complicated and more expensive method for assigning overhead costs to products?

    Found on Page 986
  4. Refer to information in Exercise 22-10. Compute profit margin and investment turnover for each department. Which department generates the most net income per dollar of sales? Which department is most efficient at generating sales from average invested assets?

    Found on Page 1019
  5. Compute the times interest earned for Park Company, which reports income before interest expense and income tacxes of $1,885,000 and interest expense of $145,000. Interpret its times interest earned (assume that its competitors average a times interest earned of 4.0).

    Found on Page 986
  6. Refer to the information in QS 22-10. Assume a target income of 12% of average invested assets. Compute residual income for each division.

    Found on Page 1015
  7. What is a transfer price? What are the three main approaches to setting transfer prices?

    Found on Page 1013
  8. A food manufacturer reports the following for two of its divisions for a recent year.

    Found on Page 1019
  9. Fill in the blanks in the schedule below for two separate investment centers A and B. Round answers to the nearest whole percent.

    Found on Page 1015
  10. Under what conditions is a market-based transfer price most likely to be used?

    Found on Page 1013

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