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19 Cards in this Set

  • Front
  • Back
A production department within the factory, such as assembly, is an example of a profit center.
FALSE
Variable costing and absorption costing income statements may differ because of their treatment of fixed selling and administrative costs.
FALSE
On a segmented income statement, fixed costs are broken down into direct fixed costs and common fixed costs.
TRUE
Return on investment (ROI) is the most common measure of performance for an investment center.
TRUE
Turnover is the ratio of operating income to sales.
FALSE
The market price is always the best transfer pricing policy.
FALSE
The selling division would never agree to a transfer price below its full manufacturing cost.
FALSE
A sunk cost is never relevant.
TRUE
If cash flows are uneven, the payback period assumes that the inflows during the last fraction of a year occur evenly.
TRUE
A disadvantage of the payback period is that it ignores the time value of money.
TRUE
Both the payback period and the accounting rate of return do not consider the profitability of a project over its life span.
TRUE
A disadvantage of post audits is that they are costly.
TRUE
The internal rate of return model does not consistently result in choices that maximize firm wealth.
TRUE
The manager of a division is displeased with the ROI of the division. One step that would increase ROI (holding everything else constant) is
increasing sales.
Which of the following is a disadvantage of a focus on return on investment?
It can produce a narrow focus on divisional profitability at the expense of profitability for the overall firm.
Decentralization is frequently chosen by companies because it:
allows for training and motivation of local managers.
Future costs that differ across alternatives are
relevant costs.
On which type of income statement does each of the following costs appear? Fixed factory overhead for the period.
Variable costing income statement
On which type of income statement does each of the following costs appear? Fixed factory overhead for units sold.
Absorption costing income statement