Multiple Choice Questions
1. When a few individuals at the top of an organization retain decision-making authority, the organization is referred to as a(n) _____________:
a. Centralized organization
b. Decentralized organization
c. Profit center
d. Investment center

2. Which of the following is not a drawback of a decentralized organization?
a. Decentralization increases opportunities for managers to gain in experience.
b. Decentralized organizations can lose focus if decision makers are unaware of a central strategy.
c. Managers often become too focused on their own division or area of the organization.
d. Managers may not receive the necessary training for making business decisions in the early parts of their careers.

3. Which of the following statements about responsibility accounting is true?
a. With responsibility accounting, managers are held responsible for both usage and price variances.
b. Companywide budgets and cost standards are useful in evaluating the performance of company segments.
c. The theme of responsibility accounting is that managers are held responsible for only those activities under their control.
d. All of the above are true.

4. A revenue center manager will most likely be held accountable for:
a. Sales volume variances
b. Sales price variances
c. Variable overhead variances
d. A and b, but not c
5. In order of increasing responsibility, which of the following is most likely to be a manager€™s progression through the various components of an organization?
a. Investment center, cost center, revenue center, profit center
b. Revenue center, cost center, profit center, investment center
c. Cost center, profit center, investment center, revenue center
d. Cost center, revenue center, profit center, investment center

6. Which of the following statements about segment costs is not true?
a. Common costs are indirect costs that are incurred to benefit more than one segment and cannot be directly traced to a particular segment.
b. Segment costs should include all costs attributable to that segment but only those costs that are actually caused by the segment.
c. A good test for deciding whether to allocate indirect fixed costs is to determine whether the cost would be reduced or eliminated if the segment were eliminated.
d. In general, all common costs should be allocated to segments.

7. If the segment margin of a division is positive, but the segment margin of an individual branch within the division is negative:
a. The individual branch should be closed immediately
b. In the long run, the individual branch is not profitable
c. Before deciding to eliminate the individual division, the firm should consider a number of quantitative and qualitative factors
d. Both b and c

8. Kid€™s Place offers day care for two-, three-, and four-year-old children. Monthly data for each division within the facility are as follows:

Common fixed costs of $6,000 are divided equally among the divisions. Segment margin for four-year-olds is:
a. $4,000
b. $2,000
c. $ 0
d.($2,000)

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Revenues Variable costs Contribution margin Traceable fixed costs Two-Year-Olds Three-Year-Olds Four-Year-Olds $15,000 10,000 $ 5,000 $15,000 12,000 $3,000 2,000 $20,000 8,000 $12,000 8,000 2,000