Exam 9: Management Control Systems and Responsibility Accounting

Groucho Corporation and Harpo Company are movie companies. Comparative data for 20X4 and 20X5 are given below. Groucho Harpo Corporation Company Sales revenue 20\times4 \ 8,400,000 \ 4,400,000 20\times5 9,600,000 6,200,000 Number of employees 20\times4 8,000 5,500 20\times5 9,000 7,000 Assume that each 20X4 dollar is equivalent to 1.50 of the 20X5 dollars, due to inflation. is Harpo Company's 20X4 revenue per employee in terms of 20X5 dollars.

The following information is available for Learning R' Us and its two divisions-Books and Periodicals: Company as Books Periodicals a whole Division Division Net sales \1 00,000 \5 0,000 \5 0,000 Fixed costs: Controllable by division man ager 16,500 12,500 4,000 Controllable by others 8,000 5,000 3,000 Variable costs: Cost of merch andise sold 24,500 17,500 7,000 Operating expenses 16,400 10,000 6,400 Unalloc ated costs 1,000 is the contribution controllable by the manager of the Periodicals Division.

Enormous Company and Petite Company are two of the largest mail order companies in the U.S. Given below is selected information for these two companies for 20X3 and 20X5. Enormous Petite Customer orders 20\times3 2,300,000 2,700,000 20\times5 2,000,000 3,400,000 Number of employees 20\times3 1,000 1,200 20\times5 1,200 1,400 Required: a. Compute the 20X3 and 20X5 productivity measures in terms of customer orders per employee for Enormous Company and Petite Company. b. Compare the change in productivity between 20X3 and 20X5 for Enormous Company and Petite Company. Do you note any problem areas?

Any cost that the management of a responsibility center cannot affect within a given time span

Improvements in the production process are examples of:

Good performance measures will be all of the following except:

are characteristics or attributes that managers must achieve to drive the organization toward its goals.

Total quality management:

Measuring the number of defects can assess the improvement in organizational learning.

A responsibility center for which a separate measure of revenues and/or costs is obtained

A(n) is the responsibility center whose success is measured not only by its income, but also by relating that income to its invested capital.

Decreasing cycle time results in bringing products or services more quickly to customers.

An analytical method aimed at achieving near- perfect results on a production line

The following information pertains to the Southwest Territory of Boomer Company: Net Sales \5 ,000 Variable costs: Cost of merchandise sold 1,200 Operating expenses 450 Fixed costs: Controllable by segment manager 600 Controllable by others 250 Unalloc ated costs 150 The contribution controllable by a segment manager is:

Hanks Company manufactures visors. Classify each of the following quality costs as: prevention, appraisal, internal failure, or external failure. a. Disposal of spoiled work in process b. Downtime due to quality problems c. Expediting work to meet delivery schedule d. Field testing e. Maintaining a complaint department f. Product liability g. Quality training h. Reinspection i. Rework direct manufacturing labor and overhead j. Scrap k. Testing and inspecting of machinery l. Testing and inspecting of direct materials m. Utilities in inspection area of plant n. Warranty repairs

To create a management control system that meets the organization's needs, designers must consider all of the following except:

The key to successful management control in any organization is proper training and motivation of employees, and consistent monitoring of objectives.

Control systems in nonprofit organizations probably will never be as highly developed as in profit- seeking firms because in nonprofit organizations:

Define a management control system and identify the issues involved with the design of a successful system.

is (are) the most basic component of a management control system.