Exam 12: Performance Evaluation in Decentralized Organizations

Cost centers for which there is a clear relation between inputs and outputs are termed discretionary cost centers.

Which of the following is not a popular measure of investment center performance? a. Employee turnover. B) Return on investment. C) Residual income. D) Economic value added. E) None of the above.

To make effective trade-offs among the attributes of performance measures, organizations often use: a. A combination of performance measures. B) Only financial performance measures. C) Avoid using more than one measure. D) Select a single performance measure that possesses of the characteristics of an effective performance measure. E) None of the above.

Organizations typically use budget variances to measure cost center performance in the long-run.

Which of the following is the formula for ROI? a. Profit ÷ Investment. B) (Profit ÷ Sales) x (Sales ÷ Investment). C) Profit margin x Asset Turnover. D) None of the above. E) All of the above.

The profit for a selling department in an inter-company transfer is the transfer price without considering costs.