Question 1

From the shareholders' point of view, performance measurement should focus on financial performance only.

Accepted Answer

A) True 
 B)False

Question 2

Huntswell Corporation has two major division Agricultural Products and Industrial Products. Data for the year just finished is as follows:
 $\begin{array}{|l|r|r|} 
\hline& \text { Agriculture Division } & \text { Industrial Division } \
\hline \text { Sales revenue } & \$ 140,000 & \$ 1,040,000 \
\hline \text { Operating income } & \$ 16,400 & \$ 220,000 \
\hline \text { Average assets } & \$ 300,000 & \$ 5,540,000 \
\hline \text { Target rate of return } & 4.0 \% & 4.0 \% \
\hline
\end{array}$ 
If Huntswell wishes to identify the division that generated the highest earnings relative to its assets, that would be the Industrial Division.

Accepted Answer

A) True 
 B)False

Question 3

Recreation Equipment Company has several divisions that are investment centers. Data for the Boat Division and the Trailer Division are shown here:
 $\begin{array}{|l|r|r|}
\hline & \text { Boat Division } & \text { Trailer Division } \
\hline \text { Operating income } & \$ 90,000 & \$ 36,000 \
\hline \text { Total assets at Jan 1 } & \$ 670,000 & \$ 230,000 \
\hline \text { Total assets at Dec } 31 & \$ 710,000 & \$ 220,000 \
\hline
\end{array}$ 
With regard to using assets efficiently, the Boat Division has the higher ROI because it has the highest operating income.

Accepted Answer

A) True 
 B)False

Question 4

KPIs, such as percentage of market share and rate of on-time deliveries, pertain to which of the four perspectives of a balanced scorecard?

Accepted Answer

A)  Financial perspective 
B)  Customer perspective 
C)  Internal business perspective 
D)  Learning and growth perspective 
A)  Financial perspective 
B)  Customer perspective 
C)  Internal business perspective 
D)  Learning and growth perspective

Question 5

Zhongfang Consumer Products has a small car division that operates as a profit center. Below is a partially completed performance report for the first quarter. $$\begin{array} { | l | r | r | r | r | r | l | } 
\hline & & & \text { Flexible Budget } & & & \
\hline & { \text { Actual } } & \text { Flexible Budget } & \text { Variance } & \text { U/F } & \text { \% variance } & \text { U/F } \
\hline \text { Sales Revenue } & \$ 688,000 & \$ 700,000 & & & & \
\hline \text { Variable expenses } & 309,000 & 320,000 & & & & \
\hline \text { Contribution margin } & 379,000 & 380,000 & & & & \
\hline \text { Traceable fixed expenses } & 371,000 & 368,000 & & & & \
\hline \text { Division margin } & \$ 8,000 & \$ 12,000 & & & & \
\hline
\end{array}$$
- How much is the percentage variance for divisional profit margin?

Accepted Answer

A)  33.3 % F 
B)  33.3 % U 
C)  0.3 % U 
D)  0.3 % F 
A)  33.3 % F 
B)  33.3 % U 
C)  0.3 % U 
D)  0.3 % F

Question 6

Which of the following is NOT one of the four perspectives of a balanced scorecard?

Accepted Answer

A)  Financial perspective 
B)  Customer perspective 
C)  Technological perspective 
D)  Learning and growth perspective 
A)  Financial perspective 
B)  Customer perspective 
C)  Technological perspective 
D)  Learning and growth perspective

Question 7

When measuring a company's performance, which of the following is NOT a lag indicator?

Accepted Answer

A)  Operating income for the last month 
B)  Ratio analysis 
C)  Variance analysis 
D)  The expected growth in future demand for a company's products 
A)  Operating income for the last month 
B)  Ratio analysis 
C)  Variance analysis 
D)  The expected growth in future demand for a company's products

Question 8

The performance measurement system must ensure that managers know the specific goals and targets for the subunits. This statement reflects which of the following performance measurement goals?

Accepted Answer

A)  Motivating unit managers 
B)  Communicating expectations 
C)  Providing feedback 
D)  Motivating managers 
A)  Motivating unit managers 
B)  Communicating expectations 
C)  Providing feedback 
D)  Motivating managers

Question 9

Revenue center performance reports highlight ONLY flexible budget variances, whereas cost center performance reports include sales volume variances.

Accepted Answer

A) True 
 B)False

Question 10

If upper management is NOT satisfied with a division's current profit margin, they should reduce product costs and operating expenses.

Accepted Answer

A) True 
 B)False

Question 11

The performance measurement system should compare the company's performance against the best practices in the industry. This statement reflects which of the following performance measurement goals?

Accepted Answer

A)  Motivating unit managers 
B)  Promoting goal congruence 
C)  Providing feedback 
D)  Benchmarking 
A)  Motivating unit managers 
B)  Promoting goal congruence 
C)  Providing feedback 
D)  Benchmarking

Question 12

Assume the Apple division of the Gala Company had the following results last year.
$\begin{array}{|l|r|}
\hline\text { Sales } & \$ 3,000,000 \
\hline \text { Operating income } & 500,000 \
\hline \text { Total as sets (average) } & 4,500,000 \
\hline \text { Current liabilities } & 300,000\\hline
\end{array}$
Management's required rate of return is 10% and the weighted average cost of capital is 8%. Its effective tax rate is 30%.
- What is Apple division's EVA?

Accepted Answer

A)  $14,000 
B)  $14,760 
C)  $15,535 
D)  $16,220 
A)  $14,000 
B)  $14,760 
C)  $15,535 
D)  $16,220

Question 13

Zhongfang Consumer Products has a small car division that operates as a profit center. Below is a partially completed performance report for the first quarter. $$\begin{array} { | l | r | r | r | r | r | l | } 
\hline & & & \text { Flexible Budget } & & & \
\hline & { \text { Actual } } & \text { Flexible Budget } & \text { Variance } & \text { U/F } & \text { \% variance } & \text { U/F } \
\hline \text { Sales Revenue } & \$ 688,000 & \$ 700,000 & & & & \
\hline \text { Variable expenses } & 309,000 & 320,000 & & & & \
\hline \text { Contribution margin } & 379,000 & 380,000 & & & & \
\hline \text { Traceable fixed expenses } & 371,000 & 368,000 & & & & \
\hline \text { Division margin } & \$ 8,000 & \$ 12,000 & & & & \
\hline
\end{array}$$
- How much is the percentage variance for traceable fixed expenses?

Accepted Answer

A)  0.8 % F 
B)  0.8 % U 
C)  0.3 % U 
D)  0.3 % F 
A)  0.8 % F 
B)  0.8 % U 
C)  0.3 % U 
D)  0.3 % F

Question 14

Huntswell Corporation has two major divisions-Agricultural Products and Industrial Products. Data for the year just finished is as follows:
$\begin{array}{|l|r|r|} 
\hline& \text { Agriculture Division } & \text { Industrial Division } \
\hline \text { Sales revenue } & \$ 140,000 & \$ 1,040,000 \
\hline \text { Operating income } & \$ 16,400 & \$ 220,000 \
\hline \text { Average assets } & \$ 300,000 & \$ 5,540,000 \
\hline \text { Target rate of return } & 4.0 \% & 4.0 \% \
\hline
\end{array}$
For the Agricultural Division, how much was the ROI?

Accepted Answer

A)  5.5% 
B)  4.5% 
C)  3.2% 
D)  5.9% 
A)  5.5% 
B)  4.5% 
C)  3.2% 
D)  5.9%

Question 15

Each one of the four perspectives of a strong balanced scorecard should have as many KPIs as management can devise, to create a more effective and efficient system.

Accepted Answer

A) True 
 B)False

Question 16

Many companies use a balanced scorecard for performance evaluation. The balanced scorecard has four business perspectives, and utilizes KPIs to evaluate performance in various areas. Which of the following KPIs would relate to the financial perspective?

Accepted Answer

A)  Hours of employee training 
B)  Number of warranty claims 
C)  Percentage of market share 
D)  Return on investment 
A)  Hours of employee training 
B)  Number of warranty claims 
C)  Percentage of market share 
D)  Return on investment

Question 17

Huntswell Corporation has two major divisions-Agricultural Products and Industrial Products. Data for the year just finished is as follows:
$\begin{array}{|l|r|r|} 
\hline& \text { Agriculture Division } & \text { Industrial Division } \
\hline \text { Sales revenue } & \$ 140,000 & \$ 1,040,000 \
\hline \text { Operating income } & \$ 16,400 & \$ 220,000 \
\hline \text { Average assets } & \$ 300,000 & \$ 5,540,000 \
\hline \text { Target rate of return } & 4.0 \% & 4.0 \% \
\hline
\end{array}$
-
For the Industrial Division, how much was the ROI?

Accepted Answer

A)  5.5% 
B)  4.5% 
C)  4.0% 
D)  3.9% 
A)  5.5% 
B)  4.5% 
C)  4.0% 
D)  3.9%

Question 18

Investment centers need KPIs to evaluate how efficiently the business unit uses assets. Typical KPIs of this type would include all of the following EXCEPT:

Accepted Answer

A)  ROI (Return on investment). 
B)  EVA (Economic value added). 
C)  NOI (Net operating income). 
D)  RI (Residual Income). 
A)  ROI (Return on investment). 
B)  EVA (Economic value added). 
C)  NOI (Net operating income). 
D)  RI (Residual Income).

Question 19

To evaluate the performance of an investment center, a business needs KPIs that measure:

Accepted Answer

A)  manufacturing productivity and product defect rate. 
B)  operating income and the efficient use of assets. 
C)  customer satisfaction and market share. 
D)  generation of sales revenues and control of operating expenses. 
A)  manufacturing productivity and product defect rate. 
B)  operating income and the efficient use of assets. 
C)  customer satisfaction and market share. 
D)  generation of sales revenues and control of operating expenses.

Question 20

Which of the following statements MOST accurately describes a company's weighted average cost of capital?

Accepted Answer

A)  The interest rate charged to the company for long-term debt 
B)  The amount a company incurs for capital expenditures 
C)  The minimum rate of return required by its investors 
D)  The average of beginning assets and ending assets 
A)  The interest rate charged to the company for long-term debt 
B)  The amount a company incurs for capital expenditures 
C)  The minimum rate of return required by its investors 
D)  The average of beginning assets and ending assets

From the shareholders' point of view, performance measurement should focus on financial performance only.

KPIs, such as percentage of market share and rate of on-time deliveries, pertain to which of the four perspectives of a balanced scorecard?

Which of the following is NOT one of the four perspectives of a balanced scorecard?

When measuring a company's performance, which of the following is NOT a lag indicator?

The performance measurement system must ensure that managers know the specific goals and targets for the subunits. This statement reflects which of the following performance measurement goals?

Revenue center performance reports highlight ONLY flexible budget variances, whereas cost center performance reports include sales volume variances.

If upper management is NOT satisfied with a division's current profit margin, they should reduce product costs and operating expenses.

The performance measurement system should compare the company's performance against the best practices in the industry. This statement reflects which of the following performance measurement goals?

Each one of the four perspectives of a strong balanced scorecard should have as many KPIs as management can devise, to create a more effective and efficient system.

Many companies use a balanced scorecard for performance evaluation. The balanced scorecard has four business perspectives, and utilizes KPIs to evaluate performance in various areas. Which of the following KPIs would relate to the financial perspective?

Investment centers need KPIs to evaluate how efficiently the business unit uses assets. Typical KPIs of this type would include all of the following EXCEPT:

To evaluate the performance of an investment center, a business needs KPIs that measure:

Which of the following statements MOST accurately describes a company's weighted average cost of capital?

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Activity-Based Costing and Other Cost Management Tools

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Filters

Exam 24: Performance Evaluation and the Balanced Scorecard

From the shareholders' point of view, performance measurement should focus on financial performance only.

KPIs, such as percentage of market share and rate of on-time deliveries, pertain to which of the four perspectives of a balanced scorecard?

Which of the following is NOT one of the four perspectives of a balanced scorecard?

When measuring a company's performance, which of the following is NOT a lag indicator?

The performance measurement system must ensure that managers know the specific goals and targets for the subunits. This statement reflects which of the following performance measurement goals?

Revenue center performance reports highlight ONLY flexible budget variances, whereas cost center performance reports include sales volume variances.

If upper management is NOT satisfied with a division's current profit margin, they should reduce product costs and operating expenses.

The performance measurement system should compare the company's performance against the best practices in the industry. This statement reflects which of the following performance measurement goals?

Each one of the four perspectives of a strong balanced scorecard should have as many KPIs as management can devise, to create a more effective and efficient system.

Many companies use a balanced scorecard for performance evaluation. The balanced scorecard has four business perspectives, and utilizes KPIs to evaluate performance in various areas. Which of the following KPIs would relate to the financial perspective?

Investment centers need KPIs to evaluate how efficiently the business unit uses assets. Typical KPIs of this type would include all of the following EXCEPT:

To evaluate the performance of an investment center, a business needs KPIs that measure:

Which of the following statements MOST accurately describes a company's weighted average cost of capital?

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Activity-Based Costing and Other Cost Management Tools

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Filters