Chapter13 (Transfer Pricing) - Chapter 13: Investment...

Chapter 13: Investment Centers and Transfer Pricing
MULTIPLE CHOICE QUESTIONS
1. The biggest challenge in making a decentralized organization function effectively is:
A. earning maximum profits through fair practices.
B. minimizing losses.
C. taking advantage of the specialized knowledge and skills of highly talented managers.
D. obtaining goal congruence among division managers.
E. developing an adequate budgetary control system.
Answer: D LO: 1 Type: RC
2. What practice is present when divisional managers throughout an organization work together
in an effort to achieve the organization's goals?
LO: 1 Type: RC
3. Consider the following statements about goal congruence:
I. Goal congruence is obtained when managers of subunits throughout an organization
strive to achieve the goals set by top management.
II. Managers are often more concerned about the performance of their own subunits
rather than the performance of the entire organization.
III. Achieving goal congruence in most organizations is relatively straightforward and
easy to accomplish.
Which of the above statements is (are) true?
LO: 1 Type: RC
Chapter 13 115

4. Which of the following performance measures is (are) used to evaluate the financial success or
failure of investment centers?
LO: 1 Type: RC
5. ROI is most appropriately used to evaluate the performance of:
A. cost center managers.
B. revenue center managers.
C. profit center managers.
D. investment center managers.
E. both profit center managers and investment center managers.
Answer: D LO: 2 Type: RC
6. Which of the following is not considered in the calculation of divisional ROI?
LO: 2 Type: RC
7. Which of the following is the correct mathematical expression for return on investment?
LO: 2 Type: RC