Question 1

Decentralizing authority empowers employees at the higher levels.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not a role of a cost center manager in an organization?

Accepted Answer

A) To achieve cost targets for a given level of output in the short term. 
B) Making continuous efficiency improvements to cut costs in the long term. 
C) To achieve sales targets for a given level of output. 
D) Neither A nor B are roles of a cost center manager. 
A) To achieve cost targets for a given level of output in the short term. 
B) Making continuous efficiency improvements to cut costs in the long term. 
C) To achieve sales targets for a given level of output. 
D) Neither A nor B are roles of a cost center manager.

Question 3

The controllability principle is always the right approach for choosing performance measures.

Accepted Answer

A) True 
 B)False

Question 4

Cost center managers serve two roles in organizations - achieving cost targets for a given level of output in the short term, and making continuous improvements to increase revenue in the long term.

Accepted Answer

achieving cost targets for a g

Question 5

Firms often view investment centers as:

Accepted Answer

A) Support activities. 
B) Discretionary cost centers. 
C) Stand-alone businesses. 
D) Revenue centers. 
E) None of the above. 
A) Support activities. 
B) Discretionary cost centers. 
C) Stand-alone businesses. 
D) Revenue centers. 
E) None of the above.

Question 6

Decentralization worsens the problem of divergence between individual and organizational goals by preventing lower-level managers from preparing to move to upper-level positions.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following transfer prices, in theory, is the most sound because it provides the best measure of the opportunity cost of inter-divisional transfers?

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.

Question 8

Which of the following describes ROI?

Accepted Answer

A) It fosters underinvestment. 
B) It ignores future period considerations. 
C) It is less suitable for evaluating long-term performance. 
D) None of the above. 
E) All of the above. 
A) It fosters underinvestment. 
B) It ignores future period considerations. 
C) It is less suitable for evaluating long-term performance. 
D) None of the above. 
E) All of the above.

Question 9

A cost center for which there is a clear relation between inputs and outputs is referred to as a:

Accepted Answer

A) Discretionary cost center. 
B) Budget center. 
C) Engineered cost center. 
D) Kaizen center. 
E) None of the above. 
A) Discretionary cost center. 
B) Budget center. 
C) Engineered cost center. 
D) Kaizen center. 
E) None of the above.

Question 10

Setting effective transfer prices is relatively simply because division managers' strategic and economic considerations for the company as a whole are the same.

Accepted Answer

A) True 
 B)False

Question 11

Production managers have little control over the volume of production.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is not an option in deciding how to incorporate depreciable fixed assets in measuring divisional investment?

Accepted Answer

A) Net book value. 
B) Gross book value. 
C) Transfer price. 
D) Replacement cost of the asset. 
E) Current value of the asset. 
A) Net book value. 
B) Gross book value. 
C) Transfer price. 
D) Replacement cost of the asset. 
E) Current value of the asset.

Question 13

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

Accepted Answer

A) Plant maintenance. 
B) Sears store. 
C) Human resources. 
D) Data processing. 
E) General administration. 
A) Plant maintenance. 
B) Sears store. 
C) Human resources. 
D) Data processing. 
E) General administration.

Question 14

From the perspective of determining corporate pre-tax income, a transfer price does not serve any useful purpose.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not a common approach to transfer pricing?

Accepted Answer

A) Variable cost-based transfer prices. 
B) Full cost -based transfer prices. 
C) Market-based transfer prices. 
D) Negotiated transfer prices. 
E) All of the above are common approaches to transfer pricing. 
A) Variable cost-based transfer prices. 
B) Full cost -based transfer prices. 
C) Market-based transfer prices. 
D) Negotiated transfer prices. 
E) All of the above are common approaches to transfer pricing.

Question 17

Net book value is the original acquisition cost of plant and equipment less accumulated depreciation.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following transfer prices always results in both divisions voluntarily making the right decisions from the perspective of the company as a whole?

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.

Question 19

Firms often use profit before taxes to evaluate profits centers, computed as contribution margin less traceable fixed costs.

Accepted Answer

A) True 
 B)False

Question 20

Suma is a philosophy of continuous improvement that encourages and rewards employees who constantly seek and suggest improvements to activities and business processes.

Accepted Answer

A) True 
 B)False

Decentralizing authority empowers employees at the higher levels.

Which of the following is not a role of a cost center manager in an organization?

The controllability principle is always the right approach for choosing performance measures.

Cost center managers serve two roles in organizations - achieving cost targets for a given level of output in the short term, and making continuous improvements to increase revenue in the long term.

Firms often view investment centers as:

Decentralization worsens the problem of divergence between individual and organizational goals by preventing lower-level managers from preparing to move to upper-level positions.

Which of the following transfer prices, in theory, is the most sound because it provides the best measure of the opportunity cost of inter-divisional transfers?

Which of the following describes ROI?

A cost center for which there is a clear relation between inputs and outputs is referred to as a:

Setting effective transfer prices is relatively simply because division managers' strategic and economic considerations for the company as a whole are the same.

Production managers have little control over the volume of production.

Which of the following is not an option in deciding how to incorporate depreciable fixed assets in measuring divisional investment?

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

From the perspective of determining corporate pre-tax income, a transfer price does not serve any useful purpose.

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

Which of the following is not a common approach to transfer pricing?

Net book value is the original acquisition cost of plant and equipment less accumulated depreciation.

Which of the following transfer prices always results in both divisions voluntarily making the right decisions from the perspective of the company as a whole?

Firms often use profit before taxes to evaluate profits centers, computed as contribution margin less traceable fixed costs.

Suma is a philosophy of continuous improvement that encourages and rewards employees who constantly seek and suggest improvements to activities and business processes.

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

Decentralizing authority empowers employees at the higher levels.

Which of the following is not a role of a cost center manager in an organization?

The controllability principle is always the right approach for choosing performance measures.

Cost center managers serve two roles in organizations - achieving cost targets for a given level of output in the short term, and making continuous improvements to increase revenue in the long term.

Firms often view investment centers as:

Decentralization worsens the problem of divergence between individual and organizational goals by preventing lower-level managers from preparing to move to upper-level positions.

Which of the following transfer prices, in theory, is the most sound because it provides the best measure of the opportunity cost of inter-divisional transfers?

Which of the following describes ROI?

A cost center for which there is a clear relation between inputs and outputs is referred to as a:

Setting effective transfer prices is relatively simply because division managers' strategic and economic considerations for the company as a whole are the same.

Production managers have little control over the volume of production.

Which of the following is not an option in deciding how to incorporate depreciable fixed assets in measuring divisional investment?

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

From the perspective of determining corporate pre-tax income, a transfer price does not serve any useful purpose.

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

Which of the following is not a common approach to transfer pricing?

Net book value is the original acquisition cost of plant and equipment less accumulated depreciation.

Which of the following transfer prices always results in both divisions voluntarily making the right decisions from the perspective of the company as a whole?

Firms often use profit before taxes to evaluate profits centers, computed as contribution margin less traceable fixed costs.

Suma is a philosophy of continuous improvement that encourages and rewards employees who constantly seek and suggest improvements to activities and business processes.

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