Question 1

Most controllable measures are informative; however an informative measure is not necessarily controllable.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following is not an example of a profit center?

Accepted Answer

A) Production department of a manufacturing plant. 
B) An individual product line at Proctor and Gamble. 
C) A retail store. 
D) All of the above are examples of profit centers. 
E) None of the above is an example of a profit center. 
A) Production department of a manufacturing plant. 
B) An individual product line at Proctor and Gamble. 
C) A retail store. 
D) All of the above are examples of profit centers. 
E) None of the above is an example of a profit center. A

Question 3

A characteristic of an effective performance measure is that it yields maximum information about the decisions or actions of the individual or organizational unit.

Accepted Answer

A) True 
 B)False  True

Question 4

Residual income represents the additional profit or value generated by an investment after meeting the required rate of return.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a performance measure used to evaluate a profit center's manager?

Accepted Answer

A) Customer satisfaction. 
B) How well the manager utilizes funds made available to his/her division. 
C) Employee turnover. 
D) Market share. 
E) All of the above are performance measures used to evaluate a profit center's manager. 
A) Customer satisfaction. 
B) How well the manager utilizes funds made available to his/her division. 
C) Employee turnover. 
D) Market share. 
E) All of the above are performance measures used to evaluate a profit center's manager.

Question 6

A characteristic of an effective performance measure is that it is easy to understand and communicate.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not a popular measure of investment center performance?

Accepted Answer

A) Employee turnover. 
B) Return on investment. 
C) Residual income. 
D) Economic value added. 
E) None of the above. 
A) Employee turnover. 
B) Return on investment. 
C) Residual income. 
D) Economic value added. 
E) None of the above.

Question 8

A common approach to setting transfer prices is using cost-based transfer prices (including variable and full cost).

Accepted Answer

A) True 
 B)False

Question 9

When intra-company transfers occur, a legally recognized sale takes place even though the divisions are part of the same company.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not a benefit of decentralization?

Accepted Answer

A) Trains future managers. 
B) Simple to coordinate decisions. 
C) Empowers employees and increases job satisfaction. 
D) Permits timely decisions. 
E) All of the above are benefits of decentralization. 
A) Trains future managers. 
B) Simple to coordinate decisions. 
C) Empowers employees and increases job satisfaction. 
D) Permits timely decisions. 
E) All of the above are benefits of decentralization.

Question 11

Ensuring smooth succession is important for the survival of any company.

Accepted Answer

A) True 
 B)False

Question 12

Organizations use monitoring, performance evaluation, and incentive schemes to manage the cost of delegating decisions.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is the formula for ROI?

Accepted Answer

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. 
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.

Question 14

Which of the following is not a cost of decentralization?

Accepted Answer

A) Might lead to an emphasis on local versus global goals. 
B) Requires costly coordination of decisions. 
C) Leads to improper decisions due to divergence between individual and organizational goals. 
D) Fails to train future managers. 
E) All of the above are costs of decentralization. 
A) Might lead to an emphasis on local versus global goals. 
B) Requires costly coordination of decisions. 
C) Leads to improper decisions due to divergence between individual and organizational goals. 
D) Fails to train future managers. 
E) All of the above are costs of decentralization.

Question 15

Managers of investment centers enjoy little autonomy in decentralized organizations.

Accepted Answer

A) True 
 B)False

Question 16

A production manager should be held accountable for:

Accepted Answer

A) Production delays. 
B) Production delays and overall volume of production. 
C) Changing prices. 
D) Changing prices and overall volume of production. 
E) Losses due to natural disasters. 
A) Production delays. 
B) Production delays and overall volume of production. 
C) Changing prices. 
D) Changing prices and overall volume of production. 
E) Losses due to natural disasters.

Question 17

Which of the following is not a responsibility center?

Accepted Answer

A) Investment center. 
B) Cost center. 
C) Administrative center. 
D) Profit center. 
E) All of the above are responsibility centers. 
A) Investment center. 
B) Cost center. 
C) Administrative center. 
D) Profit center. 
E) All of the above are responsibility centers.

Question 18

Which of the following does not describe Kaizen?

Accepted Answer

A) Encourages and rewards employees who constantly seek and suggest improvements to activities and business processes. 
B) Is a philosophy of continuous improvement. 
C) Involves comparing the effectiveness and efficiency of various activities and business processes in a firm against the best practices in the industry. 
D) None of the above statements describe Kaizen. 
E) All of the above describe Kaizen. 
A) Encourages and rewards employees who constantly seek and suggest improvements to activities and business processes. 
B) Is a philosophy of continuous improvement. 
C) Involves comparing the effectiveness and efficiency of various activities and business processes in a firm against the best practices in the industry. 
D) None of the above statements describe Kaizen. 
E) All of the above describe Kaizen.

Question 19

Which of the following is not a characteristic of effective performance measures?

Accepted Answer

A) Is easy to understand and communicate. 
B) Is easy to measure. 
C) Separates employee and organizational goals. 
D) Yields maximum information about the decisions or actions of the individual or organizational unit. 
E) All of the above are characteristics of effective performance measures. 
A) Is easy to understand and communicate. 
B) Is easy to measure. 
C) Separates employee and organizational goals. 
D) Yields maximum information about the decisions or actions of the individual or organizational unit. 
E) All of the above are characteristics of effective performance measures.

Question 20

Which of the following transfer prices gives divisions considerable autonomy?

Accepted Answer

A) Variable cost-based transfer prices. 
B) Full cost-based transfer prices. 
C) Market-based transfer prices. 
D) Negotiated transfer prices. 
E) None of the above. 
A) Variable cost-based transfer prices. 
B) Full cost-based transfer prices. 
C) Market-based transfer prices. 
D) Negotiated transfer prices. 
E) None of the above.

Most controllable measures are informative; however an informative measure is not necessarily controllable.

Which of the following is not an example of a profit center?

A characteristic of an effective performance measure is that it yields maximum information about the decisions or actions of the individual or organizational unit.

Residual income represents the additional profit or value generated by an investment after meeting the required rate of return.

Which of the following is not a performance measure used to evaluate a profit center's manager?

A characteristic of an effective performance measure is that it is easy to understand and communicate.

Which of the following is not a popular measure of investment center performance?

A common approach to setting transfer prices is using cost-based transfer prices (including variable and full cost).

When intra-company transfers occur, a legally recognized sale takes place even though the divisions are part of the same company.

Which of the following is not a benefit of decentralization?

Ensuring smooth succession is important for the survival of any company.

Organizations use monitoring, performance evaluation, and incentive schemes to manage the cost of delegating decisions.

Which of the following is the formula for ROI?

Which of the following is not a cost of decentralization?

Managers of investment centers enjoy little autonomy in decentralized organizations.

A production manager should be held accountable for:

Which of the following is not a responsibility center?

Which of the following does not describe Kaizen?

Which of the following is not a characteristic of effective performance measures?

Which of the following transfer prices gives divisions considerable autonomy?

Accounting: Information for Decision Making

Identifying and Estimating Costs and Benefits

Cost Flows and Cost Terminology

Techniques for Estimating Fixed and Variable Costs

Cost-Volume-Profit Analysis

Decision Making in the Short Term

Operating Budgets: Bridging Planning and Control

Budgetary Control and Variance Analysis

Cost Allocations

Activity-Based Costing Management

Capital Budgeting

Strategic Planning and Control

Job-Costing Systems

Process-Costing Systems

Refining Systems: Support Activity

Filters

Exam 12: Performance Evaluation in Decentralized Organizations

Most controllable measures are informative; however an informative measure is not necessarily controllable.

Which of the following is not an example of a profit center?

A characteristic of an effective performance measure is that it yields maximum information about the decisions or actions of the individual or organizational unit.

Residual income represents the additional profit or value generated by an investment after meeting the required rate of return.

Which of the following is not a performance measure used to evaluate a profit center's manager?

A characteristic of an effective performance measure is that it is easy to understand and communicate.

Which of the following is not a popular measure of investment center performance?

A common approach to setting transfer prices is using cost-based transfer prices (including variable and full cost).

When intra-company transfers occur, a legally recognized sale takes place even though the divisions are part of the same company.

Which of the following is not a benefit of decentralization?

Ensuring smooth succession is important for the survival of any company.

Organizations use monitoring, performance evaluation, and incentive schemes to manage the cost of delegating decisions.

Which of the following is the formula for ROI?

Which of the following is not a cost of decentralization?

Managers of investment centers enjoy little autonomy in decentralized organizations.

A production manager should be held accountable for:

Which of the following is not a responsibility center?

Which of the following does not describe Kaizen?

Which of the following is not a characteristic of effective performance measures?

Which of the following transfer prices gives divisions considerable autonomy?

Accounting: Information for Decision Making

Identifying and Estimating Costs and Benefits

Cost Flows and Cost Terminology

Techniques for Estimating Fixed and Variable Costs

Cost-Volume-Profit Analysis

Decision Making in the Short Term

Operating Budgets: Bridging Planning and Control

Budgetary Control and Variance Analysis

Cost Allocations

Activity-Based Costing Management

Capital Budgeting

Strategic Planning and Control

Job-Costing Systems

Process-Costing Systems

Refining Systems: Support Activity

Filters