71. It is beneficial for two related companies to use the cost price approach for transfer pricing when both of the companies operate as cost centers and are not concerned with the revenue.
72.
An activity base is used to charge service department expenses. Match each of the following questions with an activity base.
73. Which of the following would be most effective in a small owner/manager-operated business?
A. Profit centers
Centralization
C. Investment centers
D. Cost centers
74. Businesses that are separated into two or more manageable units in which managers have authority and responsibility for operations are said to be:
A. decentralized
B. consolidated
C. diversified
D. centralized
75. Which of the following is NOT a disadvantage of decentralized operation?
A. Competition among managers decreases profits
B. Duplication of operations
C. Price cutting by departments that are competing in the same product market
D. Top management freed from everyday tasks to do strategic planning
76. Which is the best example of a decentralized operation?
A. One owner who prepares plans and makes decisions for the entire company.
B. Each unit is responsible for their own operations and decision making.
C. In a major company, operating decisions are made by top management.
D. None of the above. All are examples of a centralized management.
77. The following are advantages of decentralization except:
A. Managers make better decisions when closer to the operation of the company.
B. Expertise in all areas of the business is difficult, decentralization makes it better to delegate certain responsibilities.
C. Each decentralized operation purchases their own assets and pays for operating costs.
D. Decentralized managers can respond quickly to customer satisfaction and quality service.
78. Which of the following is not one of the common types of responsibility centers?
A. Cost Center
B. Profit Center
C. Investment Center
D. Revenue Center
79. Which of the following is a disadvantage of decentralization?
A. Decisions made by one manager may negatively affect the profitability of the entire company.
B. Helps retain quality managers.
C. Decision making by managers closest to the operations.
D. Managers are able to acquire expertise in their areas of responsibility.
80. A manager is responsible for costs only in a(n):
A. profit center
B. investment center
C. volume center
D. cost center