Question 1

Which of the following KPIs are used to evaluate how efficiently a business unit uses assets?

Accepted Answer

A) Sales revenue growth 
B) Percentage of market share 
C) Residual income 
D) Production efficiency 
A) Sales revenue growth 
B) Percentage of market share 
C) Residual income 
D) Production efficiency

Question 2

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 3

Recreation Equipment Company has several divisions which are investment centers. Data for the Boat Division and the Trailer Division are shown here:   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 4

The formula for ROI can be broken down as follows: ROI = profit margin x asset turnover.

Accepted Answer

A) True 
 B)False

Question 5

All of the following statements reflect ways in which ROI is used as an evaluation tool EXCEPT:

Accepted Answer

A) the ROI of a company division is compared with that of other companies to see how it compares to the competition. 
B) a company compares the ROI of various divisions to determine which one will get additional investment. 
C) the ROI is used to determine the optimum financing mix of debt versus equity. 
D) the ROI is used across time to determine whether a division's performance is improving or not. 
A) the ROI of a company division is compared with that of other companies to see how it compares to the competition. 
B) a company compares the ROI of various divisions to determine which one will get additional investment. 
C) the ROI is used to determine the optimum financing mix of debt versus equity. 
D) the ROI is used across time to determine whether a division's performance is improving or not.

Question 6

Which of the following statements is TRUE about the weighted average cost of capital (WACC)?

Accepted Answer

A) If a business has a high risk level, the WACC will be higher. 
B) If a business has a high risk level, the WACC will be lower. 
C) The WACC represents the corporation's internal return targets. 
D) The WACC is the same as a business's ROI. 
A) If a business has a high risk level, the WACC will be higher. 
B) If a business has a high risk level, the WACC will be lower. 
C) The WACC represents the corporation's internal return targets. 
D) The WACC is the same as a business's ROI.

Question 7

In a balanced scorecard system, if financial profitability 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 8

Which of the following statements MOST accurately describes residual income?

Accepted Answer

A) How efficiently a division uses its average assets to generate sales 
B) How much operating income the division earns on every dollar of sales 
C) How much return a division generates on average assets 
D) How much extra income does a division generate above the minimum acceptable level 
A) How efficiently a division uses its average assets to generate sales 
B) How much operating income the division earns on every dollar of sales 
C) How much return a division generates on average assets 
D) How much extra income does a division generate above the minimum acceptable level

Question 9

When a company is comparing the financial performance of various divisions, it may choose to focus on RI as opposed to ROI because using RI tends to lead toward goal congruence between the division and the corporation.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following BEST describes the term goal congruence?

Accepted Answer

A) The creation of a strategic plan that sets managers' goals 
B) The alignment of unit managers' goals with those of upper management and shareholders 
C) A set of incentives for managers to achieve performance targets 
D) Making sure that compensation packages for managers at equivalent levels are equal 
A) The creation of a strategic plan that sets managers' goals 
B) The alignment of unit managers' goals with those of upper management and shareholders 
C) A set of incentives for managers to achieve performance targets 
D) Making sure that compensation packages for managers at equivalent levels are equal

Question 11

Union Company's corporate payroll department is a cost center, and submits monthly performance reports. In the report below, there are both budgeted and actual data. Please use the format below and complete the report. The percentage amounts should be rounded to the nearest one-tenth of a percent.

Accepted Answer

The answer of Union Company's corporate payroll department is a...

Question 12

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 13

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 customer 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 14

ROI (return on investment)focuses on the ratio of operating income to average assets.

Accepted Answer

A) True 
 B)False

Question 15

The manager of a cost center has control of:

Accepted Answer

A) revenues. 
B) investment decisions. 
C) expenses. 
D) investment funds. 
A) revenues. 
B) investment decisions. 
C) expenses. 
D) investment funds.

Question 16

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.
  How much is the sales volume variance for the 32 inch pipe?

Accepted Answer

A) $1,000 F 
B) $1,000 U 
C) $8,000 U 
D) $8,000 F 
A) $1,000 F 
B) $1,000 U 
C) $8,000 U 
D) $8,000 F

Question 17

Profit margin is defined as operating income divided by sales.

Accepted Answer

A) True 
 B)False

Question 18

Decentralization increases the difficulty of achieving goal congruence among managers.

Accepted Answer

A) True 
 B)False

Question 19

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:   How much is the percentage variance for Wages and benefits?

Accepted Answer

A) 2.2 % F 
B) 2.2 % U 
C) 1.5% F 
D) 1.5% U 
A) 2.2 % F 
B) 2.2 % U 
C) 1.5% F 
D) 1.5% U

Question 20

KPIs for customer satisfaction ratings 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

Exam 24: Performance Evaluation and the Balanced Scorecard

Which of the following KPIs are used to evaluate how efficiently a business unit uses assets?

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:

Recreation Equipment Company has several divisions which are investment centers. Data for the Boat Division and the Trailer Division are shown here: How much is the ROI of the Boat Division?

The formula for ROI can be broken down as follows: ROI = profit margin x asset turnover.

All of the following statements reflect ways in which ROI is used as an evaluation tool EXCEPT:

Which of the following statements is TRUE about the weighted average cost of capital (WACC)?

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

Which of the following statements MOST accurately describes residual income?

When a company is comparing the financial performance of various divisions, it may choose to focus on RI as opposed to ROI because using RI tends to lead toward goal congruence between the division and the corporation.

Which of the following BEST describes the term goal congruence?

Union Company's corporate payroll department is a cost center, and submits monthly performance reports. In the report below, there are both budgeted and actual data. Please use the format below and complete the report. The percentage amounts should be rounded to the nearest one-tenth of a percent.

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?

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 customer perspective?

ROI (return on investment)focuses on the ratio of operating income to average assets.

The manager of a cost center has control of:

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. How much is the sales volume variance for the 32 inch pipe?

Profit margin is defined as operating income divided by sales.

Decentralization increases the difficulty of achieving goal congruence among managers.

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: How much is the percentage variance for Wages and benefits?

KPIs for customer satisfaction ratings pertain to which of the four perspectives of a balanced scorecard?

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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