chap11[1] - 1. In a segmented contribution format income...

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1. In a segmented contribution format income statement, what is the best measure of the long-run profitability of a segment? A. its gross margin B. its contribution margin C. its segment margin D. its segment margin minus an allocated portion of common fixed expenses 2. In order to properly report segment margin as a guide to long-run segment profitability and performance, fixed costs must be separated into two broad categories. One category is common fixed costs. What is the other category? A. discretionary fixed costs B. committed fixed costs C. traceable fixed costs D. specialized fixed costs 3. Which of the following segment performance measures will decrease if there is an increase in the interest expense for that segment? 4. Some investment opportunities that should be accepted from the viewpoint of the entire company may be rejected by a manager who is evaluated on the basis of: A. return on investment. B. residual income. C. contribution margin. D. segment margin. 5. Which of the following measures of performance encourages continued expansion by an investment center so long as it is able to earn a return in excess of the minimum required return on average operating assets? A. return on investment B. transfer pricing C. the contribution approach D. residual income
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6. Which of the following companies is following a policy with respect to the costs of service departments that is not recommended? A. To charge operating departments with the depreciation of forklifts used at its central warehouse, Shalimar Electronics charges predetermined lump-sum amounts calculated on the basis of the long-term average use of the services provided by the warehouse to the various segments. B. Manhattan Electronics uses the sales revenue of its various divisions to allocate costs connected with the upkeep of its headquarters building. C. Rainier Industrial does not allow its service departments to pass on the costs of their inefficiencies to the operating departments. D. Golkonda Refinery separately allocates fixed and variable costs incurred by its service departments to its operating departments. 7. Toxemia Salsa Company manufactures five flavors of salsa. Last year, Toxemia generated net operating income of $40,000. The following information was taken from last year's income statement segmented by flavor (brackets indicate a negative amount): Toxemia expects similar operating results for the upcoming year. If Toxemia wants to maximize its profitability in the upcoming year, which flavor or flavors should Toxemia discontinue? A. no flavors should be discontinued
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This note was uploaded on 10/17/2011 for the course ECON 101 taught by Professor Thompson during the Spring '11 term at Michigan State University.

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chap11[1] - 1. In a segmented contribution format income...

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