Question 1

Which of the following statements is TRUE about performance reporting?

Accepted Answer

A) Reports should focus on whom to blame for unfavorable variances. 
B) Managers should not be held accountable for uncontrollable variances. 
C) Only unfavorable variances need to be explained. 
D) Every variance, regardless of magnitude, must be investigated. 
A) Reports should focus on whom to blame for unfavorable variances. 
B) Managers should not be held accountable for uncontrollable variances. 
C) Only unfavorable variances need to be explained. 
D) Every variance, regardless of magnitude, must be investigated. B

Question 2

When companies use the management by exception approach, ONLY unfavorable variances are investigated.

Accepted Answer

A) True 
 B)False  False

Question 3

The EVA is a way of looking at a division's performance from the point of view of the:

Accepted Answer

A) managers. 
B) employees. 
C) shareholders and creditors. 
D) suppliers. 
A) managers. 
B) employees. 
C) shareholders and creditors. 
D) suppliers. C

Question 4

Which of the following goals of a performance evaluation system is accomplished when the company's actual results are compared to industry standards?

Accepted Answer

A) Motivation of unit managers 
B) Promotion of goal congruence 
C) External benchmarking 
D) Communicating expectations 
A) Motivation of unit managers 
B) Promotion of goal congruence 
C) External benchmarking 
D) Communicating expectations

Question 5

One of the key drawbacks of using financial KPIs like ROI and EVA is that:

Accepted Answer

A) they are difficult and complex to calculate. 
B) they change from period to period. 
C) they cannot be readily compared to other companies. 
D) they focus only on the short term. 
A) they are difficult and complex to calculate. 
B) they change from period to period. 
C) they cannot be readily compared to other companies. 
D) they focus only on the short term.

Question 6

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 7

Huntswell Corporation has two major divisions-Agricultural Products and Industrial Products. Data for the year just finished is as follows:   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 8

If a company division has a negative RI (residual income,)that means that the division did NOT use its assets as effectively as management expected.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Parkinson Company provides the following financial data:   How much is the return on investment?

Accepted Answer

A) 6.3% 
B) 5.3% 
C) 6.9% 
D) 7.2% 
A) 6.3% 
B) 5.3% 
C) 6.9% 
D) 7.2%

Question 11

In a balanced scorecard system, which of the following KPIs would relate to the internal business perspective?

Accepted Answer

A) Defect rate 
B) Employee satisfaction 
C) Gross margin growth 
D) Number of repeat customers 
A) Defect rate 
B) Employee satisfaction 
C) Gross margin growth 
D) Number of repeat customers

Question 12

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 13

Johnson Construction Materials Company has a sales office which sells concrete culvert pipe to property developers. The sales office is a revenue center and must prepare a monthly performance report. It has provided the data below.

Accepted Answer

A) $10,000 U 
B) $1,500 F 
C) $1,850 U 
D) $9,000 F 
A) $10,000 U 
B) $1,500 F 
C) $1,850 U 
D) $9,000 F

Question 14

Huntswell Corporation has two major divisions: Agricultural Products and Industrial Products. Data for the year just finished is as follows:   For the Agricultural Division, how much is the profit margin?

Accepted Answer

A) 10.5% 
B) 11.1% 
C) 11.4% 
D) 11.7% 
A) 10.5% 
B) 11.1% 
C) 11.4% 
D) 11.7%

Question 15

Corporate divisions, like the media division of Amazon.com, are normally considered:

Accepted Answer

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

Question 16

A product line at Coca-Cola 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 17

The EVA calculation and the ROI calculation both use operating income before income tax because the income tax expense is NOT relevant to either the EVA or the ROI measures.

Accepted Answer

A) True 
 B)False

Question 18

New product development time is a measure pertaining to the balanced scorecard's:

Accepted Answer

A) learning and growth perspective. 
B) internal business perspective. 
C) financial perspective. 
D) customer perspective. 
A) learning and growth perspective. 
B) internal business perspective. 
C) financial perspective. 
D) customer perspective.

Question 19

In a decentralized business, a typical cost center is responsible for not only the profit and loss of its business, but also for the evaluation and return on capital investment projects.

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 24: Performance Evaluation and the Balanced Scorecard

Which of the following statements is TRUE about performance reporting?

When companies use the management by exception approach, ONLY unfavorable variances are investigated.

The EVA is a way of looking at a division's performance from the point of view of the:

Which of the following goals of a performance evaluation system is accomplished when the company's actual results are compared to industry standards?

One of the key drawbacks of using financial KPIs like ROI and EVA is that:

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

Huntswell Corporation has two major divisions-Agricultural Products and Industrial Products. Data for the year just finished is as follows: For the Agricultural Division, how much was the ROI?

If a company division has a negative RI (residual income,)that means that the division did NOT use its assets as effectively as management expected.

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

Parkinson Company provides the following financial data: How much is the return on investment?

In a balanced scorecard system, which of the following KPIs would relate to the internal business perspective?

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.

Johnson Construction Materials Company has a sales office which sells concrete culvert pipe to property developers. The sales office is a revenue center and must prepare a monthly performance report. It has provided the data below.

Huntswell Corporation has two major divisions: Agricultural Products and Industrial Products. Data for the year just finished is as follows: For the Agricultural Division, how much is the profit margin?

Corporate divisions, like the media division of Amazon.com, are normally considered:

A product line at Coca-Cola is most likely treated as a(n):

The EVA calculation and the ROI calculation both use operating income before income tax because the income tax expense is NOT relevant to either the EVA or the ROI measures.

New product development time is a measure pertaining to the balanced scorecard's:

In a decentralized business, a typical cost center is responsible for not only the profit and loss of its business, but also for the evaluation and return on capital investment projects.

The formula for ROI (return on investment)is:

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandising Inventory

Internal Control and Cash

Receivables

Plant Assets and Intangibles

Current Liabilities and Payroll

Long-Term Liabilities, Bonds Payable, and Classification of Liabilities on the Balance Sheet

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

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