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Key to Quiz _6 4-27-2010

Managerial Accounting: Creating Value in a Dynamic Business Environment

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ACC 312 Quiz #6 4/27/2010 Name: KEY Class Time: Indicate whether the following statements are True or False (1.5 each =12 points) 1. The 4 types of responsibility centers are: Cost, Revenue , Profit and Investment centers. True 2. Responsibility accounting refers to the various concepts and tools used by management accountants to evaluate the performance of people and departments in order to foster goal congruence. True 3. Segmented income statements highlight segment gross margin, profit controllable by segment manager, segment profit margin and net income. False 4. Return on investment (ROI), Residual income and Economic value added are performance measures used to evaluate cos t centers. False 5. ROI = Invested capital/sales revenue False 6. Residual income = Investment center’s profit (investment center’s invested capital * weighted average cost of capital ) False 7. Economic value added = Investment center’s after tax profit- [(Investment centers total assets – Investments center’s total liabilities ) * cost of equity capital )] False 8. Residual income should be used when evaluating the performance of two different sized investment centers
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