Performance Measurement and Responsibility Accounting Quiz

The methods used to set transfer prices include market-based, cost-based, and negotiated transfer prices. Transfer pricing is important in decentralized organizations to ensure that divisions are fairly compensated for the goods and services they provide to other units within the organization.

Direct expenses are costs that can be easily traced to a specific department or product, such as direct materials and direct labor. Indirect expenses are costs that cannot be easily traced to a specific department or product, such as factory rent and utilities.

Joint costs are allocated across products using various methods such as physical units, sales value at split-off, and net realizable value. This allocation is important for decision-making as it helps in determining the profitability of individual products and making pricing and production decisions.

<p>The key performance measures used to analyze investment centers include return on investment, residual income, profit margin, investment turnover, and balanced scorecard. These measures help in evaluating the profitability, efficiency, and overall performance of the investment centers.</p> Signup and view all the answers

<p>Responsibility accounting reports are prepared by identifying and reporting controllable costs for each department or unit. Controllable costs are significant in these reports as they help in evaluating the performance of managers and holding them accountable for the costs under their control.</p> Signup and view all the answers