题型：单选题 难度星级：★★★★★ 
5.3万热度
'the use of residual income in performance measurement will avoid dysfunctional decision-makingbecause it will always lead to the correct decision concerning capital investments.'
atrue
false
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division b of a company makes units which are then transferred to other divisions. thedivision has no spare capacity. the following statements have been made regarding theminimum transfer price that will encourage the divisional manager of b to transfer units toother divisions:
(1) any price above variable cost will generate a positive contribution, and will thereforebe accepted.
(2) the division will need to give up a unit sold externally in order to make a transfer;this is only worthwhile if the income of a transfer is greater than the net income of anexternal sale.
which of the above statement(s) is/are true
(1) only
(2) only
cneither (1) nor (2)
both (1) and (2)
perrin co has two divisions, a and b.
division a has limited skilled labour and is operating at full capacity making product y. it hasbeen asked to supply a different product, x, to division b. division b currently sources thisproduct externally for $700 per unit.
the same grade of materials and labour is used in both products. the cost cards for eachproduct are shown below:
product y x
($)/unit ($)/unit
selling price 600 –
direct materials ($50 per kg) 200 150
direct labour ($20 per hour) 80 120
apportioned fixed overheads ($15 per hour) 60 90
using an opportunity cost approach to transfer pricing, what is the minimum transferprice
$270
$750
$590
$840
oxco has two divisions, a and b. division a makes a component for air conditioning unitswhich it can only sell to division b. it has no other outlet for sales.
current information relating to division a is as follows:
marginal cost per unit $100
transfer price of the component $165
total production and sales of the component each year 2,200 units
specific fixed costs of division a per year $10,000
cold co has offered to sell the component to division b for $140 per unit.
if division baccepts this offer, division a will be shut.if division b accepts cold co’s offer, what will be the impact on profits per year for thegroup as a whole
increase of $65,000
decrease of $78,000
decrease of $88,000
increase of $55,000
dust co has two divisions, a and b. each division is currently considering the followingseparate projects:
division a division b
capital required for the project $32.6 million $22.2 million
sales generated by the project $14.4 million $8.8 million
operating profit margin 30% 24%
cost of capital 10% 10%
current return on investment of division 15% 9%
if residual income is used as the basis for the investment decision, which division(s)would choose to invest in the project
division a only
division b only
both division a and division b
neither division a neither division b
ejet is an airline company that operates domestically and internationally using a fleet of 20aircraft. passengers book flights using the internet or by telephone and pay for their flights at thetime of booking using a debit or credit card.
ejet currently measures its performance using financial ratios. the new managing director hassuggested that non-financial measures are equally important as financial measures and providefurther insights into company performance.
indicate the statements shown below that are valid:
a non-financial measures are less likely to be manipulated than traditional financial ratios.
b non-financial measures may discourage dysfunctional behaviour by airline staff.
c financial ratios do not need to be linked with non-financial measures.
d non-financial measures are a better indicator of future prospects than financial ratios whichfocus on the short term.
e internal efficiency can be measured by the number of flight take-offs that are on time.
f non-financial performance measures do not need to be developed and refined over time asthey always remain relevant.
g customer satisfaction can be measured in terms of the number of failed attempts to make abooking due to website crashes.
to prevent dysfunctional transfer price decision-making, profit centres must be allowed to makeautonomous decisions. true or false
true
false
which of the following is not a disadvantage of using market value as a transfer price
the market price might be a temporary one.
use of market price might act as a disincentive to use up spare capacity.
many products do not have an equivalent market price.
the external market might be perfect.
the following information relates to an investment centre, which is a separate product division in alarge company.
$
net current assets 60,000
non-current assets 240,000
profit before depreciation 50,000
depreciation 10,000
the company's cost of capital is 10%. what is the most appropriate measure of the centre's returnon investment (roi)
a3.3%
13.3%
16.7%
20.8%
swal has two divisions, sw and al, which operate as profit centres and have full autonomy inmaking, buying and selling decisions.
sw manufactures sw at a cost of $12 per unit. the market price of sw is $16 per unit.
al uses sw in manufacturing its own product. the transfer price of sw when transferred fromdivision sw to division al is set at full production cost plus 20%.
which one of the following independent circumstances represents dysfunctional behaviourarising from swal's transfer pricing policy
asw refuses to sell sw to al as there is unlimited demand for sw in the external market.
al refuses to order from sw as it can buy sw from the open market at lower than currenttransfer price. as a result, sw sells all its units on the open market.
sw refuses to transfer below market price so al is forced to buy from the external market.
sw agrees to sell to al but has to cancel the sale in order to fulfil an urgent customer orderwho is willing to pay a higher price for immediate delivery.
this question appeared in the june 2015 exam.
a division is considering investing in capital equipment costing $2.7m. the useful economic life ofthe equipment is expected to be 50 years, with no resale value at the end of the period. theforecast return on the initial investment is 15% per annum before depreciation. the division's costof capital is 7%
what is the expected annual residual income of the initial investment
a$0
($270,000)
$162,000
$216,000