Question 1

One of the advantages of decentralization is that it allows top management to concentrate on long-term strategic planning.

Accepted Answer

A) True 
 B)False

Question 2

Centralized companies 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 3

The performance report of a profit center includes both revenues and expenses.

Accepted Answer

A) True 
 B)False

Question 4

Residual Income (RI)compares the division's actual operating income with the minimum operating income expected for the given size of the division's average total assets.

Accepted Answer

A) True 
 B)False

Question 5

The return on investment of a company can be improved by either increasing average total assets or decreasing operating income.

Accepted Answer

A) True 
 B)False

Question 6

Long-term investments are made by the manager of an investment division for the purpose of ________.

Accepted Answer

A) increasing profits 
B) decreasing profits 
C) increasing interest liability 
D) decreasing debt liability 
A) increasing profits 
B) decreasing profits 
C) increasing interest liability 
D) decreasing debt liability

Question 7

Which of the following is the correct formula for calculating return on investment (ROI)?

Accepted Answer

A) Net profit ÷ Sales 
B) Gross profit ÷ Sales 
C) Operating income ÷ Average total assets 
D) Earnings available to stockholders ÷ Number of outstanding shares of stock 
A) Net profit ÷ Sales 
B) Gross profit ÷ Sales 
C) Operating income ÷ Average total assets 
D) Earnings available to stockholders ÷ Number of outstanding shares of stock

Question 8

Which of the following is a key performance indicator of the financial perspective in a balanced scorecard?

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 9

Return on investment focuses on net income in the numerator of the ratio.

Accepted Answer

A) True 
 B)False

Question 10

Smaller variances signal that operations are close to the target and do not require management's immediate attention.

Accepted Answer

A) True 
 B)False

Question 11

Moon Beverages Corporation provides the following financial information:  
- Calculate the target rate of return.

Accepted Answer

A) 22% 
B) 25% 
C) 18% 
D) 15% 
A) 22% 
B) 25% 
C) 18% 
D) 15%

Question 12

Operating income alone does not indicate how efficiently a segment is using its assets.

Accepted Answer

A) True 
 B)False

Question 13

The balanced scorecard is a performance evaluation system that requires management to consider financial measures of performance,but not nonfinancial measures.

Accepted Answer

A) True 
 B)False

Question 14

Johnson Construction Materials Company has a sales office which sells concrete culvert pipes to property developers.The sales office is a revenue center and must prepare a monthly performance report.It has provided the following information.  
- What is the sales volume variance for the 36 inch long pipe?

Accepted Answer

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

Question 15

Regardless of the type of responsibility center,responsibility reports should focus on information,not blame.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is true of performance reporting?

Accepted Answer

A) Responsibility reports should focus on the person responsible for unfavorable variances,rather than information. 
B) Managers should not be held accountable for uncontrollable variances. 
C) Only unfavorable variances should be explained in the reports. 
D) Every variance,regardless of magnitude,must be investigated by the managers. 
A) Responsibility reports should focus on the person responsible for unfavorable variances,rather than information. 
B) Managers should not be held accountable for uncontrollable variances. 
C) Only unfavorable variances should be explained in the reports. 
D) Every variance,regardless of magnitude,must be investigated by the managers.

Question 17

Uncontrollable costs are the costs that can be influenced by the decisions of a manager.

Accepted Answer

A) True 
 B)False

Question 18

Qvoware Inc.sells cosmetic products in the United States.Which one of the following is most likely to be a revenue center for Qvoware?

Accepted Answer

A) a Qvoware retail store in Dallas 
B) the Qvoware HR department 
C) a Qvoware kiosk at a mall for selling its products 
D) the Qvoware product lines 
A) a Qvoware retail store in Dallas 
B) the Qvoware HR department 
C) a Qvoware kiosk at a mall for selling its products 
D) the Qvoware product lines

Question 19

A unique factor of responsibility accounting performance reports is the focus on responsibility and controllability.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is the correct formula for the asset turnover ratio?

Accepted Answer

A) Net sales ÷ Average total assets 
B) Net sales ÷ Cost of goods sold 
C) Net Sales ÷ Net assets 
D) Net profit ÷ Net sales 
A) Net sales ÷ Average total assets 
B) Net sales ÷ Cost of goods sold 
C) Net Sales ÷ Net assets 
D) Net profit ÷ Net sales

Exam 24: Responsibility Accounting and Performance Evaluation

One of the advantages of decentralization is that it allows top management to concentrate on long-term strategic planning.

Centralized companies split their operations into different divisions or operating units and top management delegates decision-making to the division/unit managers.

The performance report of a profit center includes both revenues and expenses.

Residual Income (RI)compares the division's actual operating income with the minimum operating income expected for the given size of the division's average total assets.

The return on investment of a company can be improved by either increasing average total assets or decreasing operating income.

Long-term investments are made by the manager of an investment division for the purpose of ________.

Which of the following is the correct formula for calculating return on investment (ROI)?

Which of the following is a key performance indicator of the financial perspective in a balanced scorecard?

Return on investment focuses on net income in the numerator of the ratio.

Smaller variances signal that operations are close to the target and do not require management's immediate attention.

Moon Beverages Corporation provides the following financial information: - Calculate the target rate of return.

Operating income alone does not indicate how efficiently a segment is using its assets.

The balanced scorecard is a performance evaluation system that requires management to consider financial measures of performance,but not nonfinancial measures.

Regardless of the type of responsibility center,responsibility reports should focus on information,not blame.

Which of the following statements is true of performance reporting?

Uncontrollable costs are the costs that can be influenced by the decisions of a manager.

Qvoware Inc.sells cosmetic products in the United States.Which one of the following is most likely to be a revenue center for Qvoware?

A unique factor of responsibility accounting performance reports is the focus on responsibility and controllability.

Which of the following is the correct formula for the asset turnover ratio?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Internal Control and Cash

Receivables

Plant Assets, natural Resources, and Intangibles

Investments

Current Liabilities and Payroll

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Management Systems: Activity-Based, just-In-Time, and Quality Management Systems

Cost-Volume-Profit Analysis

Variable Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Short-Term Business Decisions

Capital Investment Decisions

Accounting Information Systems

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