Question 1

The production line at Gateway Computers is most likely treated as a(n):

Accepted Answer

A)  cost center. 
B)  revenue center. 
C)  profit center. 
D)  investment center. 
A)  cost center. 
B)  revenue center. 
C)  profit center. 
D)  investment center.

Question 2

The formula for ROI (return on investment) is:

Accepted Answer

A)  operating income divided by average total assets. 
B)  operating income minus minimum acceptable operating income. 
C)  after-tax operating income minus the weighted average cost of capital times average total assets excluding current liabilities. 
D)  operating income divided by sales revenue. 
A)  operating income divided by average total assets. 
B)  operating income minus minimum acceptable operating income. 
C)  after-tax operating income minus the weighted average cost of capital times average total assets excluding current liabilities. 
D)  operating income divided by sales revenue.

Question 3

Performance evaluation systems provide top management with a framework for maintaining control over the organization.

Accepted Answer

A) True 
 B)False

Question 4

In a balanced scorecard system, if customer satisfaction was one of the critical factors, which of the following would be a relevant KPI?

Accepted Answer

A)  Revenue growth 
B)  Production yield rate 
C)  Market share 
D)  Employee training hours 
A)  Revenue growth 
B)  Production yield rate 
C)  Market share 
D)  Employee training hours

Question 5

Which of the following is an advantage of decentralization?

Accepted Answer

A)  May create disparities in alignment of goals between different business units 
B)  May cause inconsistencies in the way various business units operate 
C)  May duplicate costs and functions across multiple business units 
D)  Helps prepare and train managers at lower levels for higher positions later on 
A)  May create disparities in alignment of goals between different business units 
B)  May cause inconsistencies in the way various business units operate 
C)  May duplicate costs and functions across multiple business units 
D)  Helps prepare and train managers at lower levels for higher positions later on

Question 6

Waycross Construction Company has a pipeyard operation which is run as a cost center. They are preparing a performance report for the month of March and have provided the data below:
$\begin{array}{|l|r|r|r|r|r|r|}
\hline \text { Cost Center } & & \text { Flexible } & \text { Flexible Budget } \
\hline \text { Performance Report } & \text { Actual } & \text { Budget } & \text { Variance } & \text { U/F } & \% \text { variance } & \text { U/F } \
\hline \text { Wages \& benefits } & \$ 81,200 & \$ 80,000 \
\hline \text { Office lease expense } & 42,060 & 45,000 \
\hline \text { Depreciation expense } & 39,600 & 42,000 \
\hline \text { Insurance expense } & 33,490 & 30,000 \
\hline \text { Other expense } & 7,120 & 8,000 \
\hline & \$ 203,470 & \$ 205,000 \
\hline
\end{array}$

Accepted Answer

A)  11.6 % U 
B)  11.6 % F 
C)  12.5 % U 
D)  12.5% F 
A)  11.6 % U 
B)  11.6 % F 
C)  12.5 % U 
D)  12.5% F

Question 7

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. Please complete the report in the format below.
Profit Center Performance Report $$\begin{array} { | l | r | r | r | r | r | l | } 
\hline & & & \text { Flexible Budget } & & & \
\hline &{ \text { Actual } } & \text { Flexible Budget } & \text { Variance } & \text { U/F } & \text { \% variance } & \text { U/F } \
\hline \text { Sales Revenue } & \$ 688,000 & \$ 700,000 & & & & \
\hline \text { Variable expenses } & 309,000 & 320,000 & & & & \
\hline \text { Contribution margin } & 379,000 & 380,000 & & & & \
\hline \text { Traceable fixed expenses } & 371,000 & 368,000 & & & & \
\hline \text { Division margin } & \$ 8,000 & \$ 12,000 & & & & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array}{l}
\text { Profit Center

Question 8

Companies that are centralized split their operations into different divisions or operating units and top management delegates decision-making to the division/unit managers.

Accepted Answer

A) True 
 B)False

Question 9

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 is the profit margin?

Accepted Answer

A)  21.2% 
B)  19.3% 
C)  17.4% 
D)  16.7% 
A)  21.2% 
B)  19.3% 
C)  17.4% 
D)  16.7%

Question 10

Both RI and EVA calculate whether a corporate division generated operating income above the target set by the business, but they do so from different perspectives.

Accepted Answer

A) True 
 B)False

Question 11

The formula for EVA (economic value added) is:

Accepted Answer

A)  operating income divided by average total assets. 
B)  operating income minus minimum acceptable operating income. 
C)  after-tax operating income minus the weighted average cost of capital times average total assets excluding current liabilities. 
D)  operating income divided by sales revenue. 
A)  operating income divided by average total assets. 
B)  operating income minus minimum acceptable operating income. 
C)  after-tax operating income minus the weighted average cost of capital times average total assets excluding current liabilities. 
D)  operating income divided by sales revenue.

Question 12

Assume Division 1 of the XYZ 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 8% and the weighted average cost of capital is 6%. Its effective tax rate is 30%.
-What is the division's return on investment?

Accepted Answer

A)  5% 
B)  10% 
C)  20% 
D)  50% 
A)  5% 
B)  10% 
C)  20% 
D)  50%

Question 13

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 is the residual income?

Accepted Answer

A)  $2,400 
B)  $1,650 
C)  ($200) 
D)  ($1,600) 
A)  $2,400 
B)  $1,650 
C)  ($200) 
D)  ($1,600)

Question 14

Which of the following is a lagging indicator?

Accepted Answer

A)  Operational performance 
B)  Customer satisfaction 
C)  Financial performance 
D)  Employee training 
A)  Operational performance 
B)  Customer satisfaction 
C)  Financial performance 
D)  Employee training

Question 15

Recreation Equipment Company has several divisions which are investment centers. Data for the Boat Division and the Trailer Division are shown here:
$\begin{array}{|l|r|r|}
\hline & \text { Boat Division } &{\text { Trailer Division }} \
\hline \text { Operating income } & \$ 90,000 & \$ 36,000 \
\hline \text { Total assets at Jan 1 } & \$ 670,000 & \$ 230,000 \
\hline \text { Total assets at Dec } 31 & \$ 710,000 & \$ 220,000 \
\hline
\end{array}$
-
How much is the ROI of the Boat Division?

Accepted Answer

A)  12.7% 
B)  12.8% 
C)  12.9% 
D)  13.0% 
A)  12.7% 
B)  12.8% 
C)  12.9% 
D)  13.0%

Question 16

Westhaven Company has a warehousing unit which operates as a cost center. They prepare monthly performance reports.
The report for February is shown here:
$\begin{array}{|l|r|r|r|r|r|r|}
\hline \text { Cost Center } & & \text { Flexible } & \text { Flexible Budget } \
\hline \text { Performance Report } & \text { Actual } & \text { Budget } & \text { Variance } & \text { U/F } & \% \text { variance } & \text { U/F } \
\hline \text { Salary \& benefits } & \$ 119,000 & \$ 120,000 & \$ 1,000 & F & 0.8 \% & F \
\hline \text { Rent expense } & 94,500 & 90,000 & 4,500 & U & 5.0 \% & U \
\hline \text { Depreciation expense } & 23,200 & 24,000 & 800 & F & 3.3 \% & \text { F } \
\hline \text { Depreciation expense } & 23,200 & 24,000 & 800 & F & 3.3 \% & \text { F } \
\hline \text { Supply expense }  & 11,890 & 12,000 & 110 & \text { F } & 0.9 \% & \text { F } \
\hline \text { Other expense } & 8,120 & 8,000 & 120 & \mathrm{U} & 1.5 \% & \mathrm{U} \
\hline& \$ 256,710 & \$ 254,000 & \$ 2,710 & \mathrm{U} & 1.1 \% & \mathrm{U} \
\hline
\end{array}$

Westhaven uses the management by exception approach. On which of the following variances would the company focus first for investigation and explanation?

Accepted Answer

A)  Supply expense 
B)  Rent expense 
C)  Other expense 
D)  Depreciation expense 
A)  Supply expense 
B)  Rent expense 
C)  Other expense 
D)  Depreciation expense

Question 17

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 variance for sales revenue?

Accepted Answer

A)  $11,000 F 
B)  $12,000 F 
C)  $12,000 U 
D)  $13,000 F 
A)  $11,000 F 
B)  $12,000 F 
C)  $12,000 U 
D)  $13,000 F

Question 18

Which of the following is FALSE about a balanced scorecard?

Accepted Answer

A)  It communicates the company's strategy to employees. 
B)  It monitors how well the company's employees are realizing the company's business strategy. 
C)  It provides a starting point for creating company strategies. 
D)  It provides benchmarks to encourage employees to carry out the company's strategy. 
A)  It communicates the company's strategy to employees. 
B)  It monitors how well the company's employees are realizing the company's business strategy. 
C)  It provides a starting point for creating company strategies. 
D)  It provides benchmarks to encourage employees to carry out the company's strategy.

Question 19

Customer satisfaction, operational efficiency, and employee excellence are the three primary considerations when using the balanced scorecard approach.

Accepted Answer

A) True 
 B)False

Question 20

Tavares Manufactured Homes Company has a sales division which submits a monthly performance report as a revenue center. Please complete the report using the format and data below.
Revenue Center Performance Report - $K $$\begin{array} { | l | r | c | c | c | c | c | c | } 
\hline & \text { Actual } & \text { Flexible Budget } & & \text { Flexible } & \text { Sales Volume } & &  { \text { Static } } \
\hline \text { Product type: } & \text { Sales Revenue } & \text { Variance } & \text { U/F } & \text { Budget } & \text { Variance } & \text { U/F } & \text { Budget } \
\hline \text { Model A } & \$ 11,200 & & & \$ 12,000 & & & \$ 10,000 \
\hline \text { Model B1 } & \$ 3,300 & & & \$ 3,000 & & & \$ 5,000 \
\hline \text { Model B2 } & \$ 3,960 & & & \$ 4,000 & & & \$ 4,000 \
\hline \text { Model B3 } & \$ 5,100 & & & \$ 5,000 & & & \$ 4,000 \
\hline
\end{array}$$

Accepted Answer

Revenue Center Performance Report - $K \

The production line at Gateway Computers is most likely treated as a(n):

The formula for ROI (return on investment) is:

Performance evaluation systems provide top management with a framework for maintaining control over the organization.

In a balanced scorecard system, if customer satisfaction was one of the critical factors, which of the following would be a relevant KPI?

Which of the following is an advantage of decentralization?

Companies that are centralized split their operations into different divisions or operating units and top management delegates decision-making to the division/unit managers.

Both RI and EVA calculate whether a corporate division generated operating income above the target set by the business, but they do so from different perspectives.

The formula for EVA (economic value added) is:

Which of the following is a lagging indicator?

Which of the following is FALSE about a balanced scorecard?

Customer satisfaction, operational efficiency, and employee excellence are the three primary considerations when using the balanced scorecard approach.

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

The production line at Gateway Computers is most likely treated as a(n):

The formula for ROI (return on investment) is:

Performance evaluation systems provide top management with a framework for maintaining control over the organization.

In a balanced scorecard system, if customer satisfaction was one of the critical factors, which of the following would be a relevant KPI?

Which of the following is an advantage of decentralization?

Companies that are centralized split their operations into different divisions or operating units and top management delegates decision-making to the division/unit managers.

Both RI and EVA calculate whether a corporate division generated operating income above the target set by the business, but they do so from different perspectives.

The formula for EVA (economic value added) is:

Which of the following is a lagging indicator?

Which of the following is FALSE about a balanced scorecard?

Customer satisfaction, operational efficiency, and employee excellence are the three primary considerations when using the balanced scorecard approach.

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