Question 1

Goal congruence is the practice of comparing the company's achievements against the best practices in the industry.

Accepted Answer

A) True 
 B)False  False

Question 2

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  False

Question 3

A company uses a balanced scorecard and has established a key performance indicator for product quality. If the actual warranty claims are higher than expected, there is an indication that the quality standards have been met.

Accepted Answer

A) True 
 B)False  False

Question 4

The return on investment formula focuses on the amount of operating income earned before considering other revenue and expense items, such as interest expense.

Accepted Answer

A) True 
 B)False

Question 5

Katsu, Inc. has a small car division that operates as a profit center. Below is a partially completed responsibility report for the first quarter.  $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$\text { Responsibility Report }$
$$\begin{array} { |c | c | c | c | c | c | c| } 
\hline & \text { Actual } & \begin{array} { c } 
\text { Flexible } \
\text { Budget }
\end{array} & \begin{array} { c } 
\text { Flexible } \
\text { Budget } \
\text { Variance }
\end{array} & \text { U/F } & \begin{array} { c } 
\text { Percentage } \
\text { Variance }
\end{array} & \text { U/F } \
\hline \begin{array} { c } 
\text { Sales } \
\text { Revenue }
\end{array} & \$ 688,000 & \$ 700,000 & & & & \
\hline \begin{array} { c } 
\text { Variable } \
\text { Expenses }
\end{array} & \underline { 309,000 } & \underline { 322,000 } & & & & \
\hline \begin{array} { c } 
\text { Contribution } \
\text { Margin }
\end{array} & 379,000 & 378,000 & & & & \
\hline \begin{array} { c } 
\text { Traceable } \
\text { Fixed } \
\text { Expenses }
\end{array} & \underline { 372,000 } & \underline { 369,000 } & & & & \
\hline \begin{array} { c } 
\text { Division } \
\text { Margin }
\end{array} & \$ 7000 & \$ 9000 & & & & \
\hline
\end{array}$$ Compute the percentage variance for the flexible budget variance for sales revenue. (Round your answer to two decimal places.)

Accepted Answer

A)  1.71% F 
B)  1.71% U 
C)  4.04% U 
D)  4.04% F 
A)  1.71% F 
B)  1.71% U 
C)  4.04% U 
D)  4.04% F

Question 6

Managerial accountants can design performance evaluation systems that encourage goal congruence.

Accepted Answer

A) True 
 B)False

Question 7

When a division is operating at capacity, the transfer price should be ________.

Accepted Answer

A)  based on opportunity cost 
B)  a market-based transfer price 
C)  a cost-based transfer price 
D)  the total manufacturing cost 
A)  based on opportunity cost 
B)  a market-based transfer price 
C)  a cost-based transfer price 
D)  the total manufacturing cost

Question 8

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 9

In general, calculating ROI based on the gross book value of assets gives managers an incentive to continue using old, outdated equipment.

Accepted Answer

A) True 
 B)False

Question 10

The internal business perspective of the balanced scorecard is concerned with ________.

Accepted Answer

A)  how customers perceive the business and its products and services 
B)  the company's ability to improve and create value 
C)  which business processes the company must excel in to meet expectations 
D)  whether investors and creditors view the company favorably 
A)  how customers perceive the business and its products and services 
B)  the company's ability to improve and create value 
C)  which business processes the company must excel in to meet expectations 
D)  whether investors and creditors view the company favorably

Question 11

The term "goal congruence" refers to the ________.

Accepted Answer

A)  matching of financial goals of the company with its nonfinancial goals 
B)  aligning the goals of business segment managers with the goals of top management 
C)  achievement of the goals set by the management by utilizing the resources available 
D)  duplication of costs as a result of decentralization 
A)  matching of financial goals of the company with its nonfinancial goals 
B)  aligning the goals of business segment managers with the goals of top management 
C)  achievement of the goals set by the management by utilizing the resources available 
D)  duplication of costs as a result of decentralization

Question 12

List the four types of responsibility centers. For each center, state the responsibility of the manager.
 $$\begin{array} { | c | l | } 
\hline \begin{array} { c } 
\text { Type of } \
\text { responsibility center }
\end{array} & \text { Responsibility of the manager } \
\hline & \
\hline & \
\hline & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | l | } 
\hline \b

Question 13

Residual income indicates how ________.

Accepted Answer

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

Question 14

If upper management uses a short time frame to calculate ROI and RI, division managers have an incentive to take actions that will lead to an immediate increase in these measures.

Accepted Answer

A) True 
 B)False

Question 15

A high rate of employee turnover indicates that ________.

Accepted Answer

A)  employees of the organization leave their jobs frequently 
B)  pay packages of employees are at par with that of the industry 
C)  the employee retention ratio is also high 
D)  employees also participate in the decision-making process 
A)  employees of the organization leave their jobs frequently 
B)  pay packages of employees are at par with that of the industry 
C)  the employee retention ratio is also high 
D)  employees also participate in the decision-making process

Question 16

Anderson Construction Materials Company has a sales office that sells concrete culvert pipes to property developers. The sales office is a revenue center and prepares a monthly responsibility report. The following information is provided. Complete the responsibility report.
 Anderson Construction Materials Company 
Revenue Center Responsibility Report $\begin{array}{cccccc}
& \text { Actual Sales } & \text { Flexible Budget } & & \text { Sales Volume } & \
 \text { Product Type } & \text { Revenue } & \text { Variance } & \text { Flexible Budget } & \text { Variance } & \text { Static Budget } \
 40 \text { inch } & \$ 31,700 & & \$ 30,500 & & \$ 40,800 \
 36 \text { inch } & 40,150 & & 42,200 & & 33,000 \
 32 \text { inch } & \underline{19,100} & & 20,000 & & \underline{28,4} \
\text { Total}
\end{array}$

Accepted Answer

Anderson Constructio

Question 17

A company's "climate for action" is a corporate culture ________.

Accepted Answer

A)  that encourages communication, change, and growth 
B)  that is focused on strong, top-down command and control 
C)  that is aimed exclusively at period earnings 
D)  that discourages physical activity, sports, and recreation to improve employee health and morale 
A)  that encourages communication, change, and growth 
B)  that is focused on strong, top-down command and control 
C)  that is aimed exclusively at period earnings 
D)  that discourages physical activity, sports, and recreation to improve employee health and morale

Question 18

The practice of comparing the company's achievements against the best practices in the industry is known as ________.

Accepted Answer

A)  segmentation 
B)  goal congruence 
C)  performance evaluation 
D)  benchmarking 
A)  segmentation 
B)  goal congruence 
C)  performance evaluation 
D)  benchmarking

Question 19

Because profit centers are only responsible for controlling costs, their performance reports include only information on actual costs versus budgeted costs.

Accepted Answer

A) True 
 B)False

Question 20

A profit center responsibility report ________.

Accepted Answer

A)  should not include costs for which the profit center manager is not accountable 
B)  does not include revenues since that information only appears on the revenue center responsibility report 
C)  includes traceable fixed expenses 
D)  is the same as a performance report 
A)  should not include costs for which the profit center manager is not accountable 
B)  does not include revenues since that information only appears on the revenue center responsibility report 
C)  includes traceable fixed expenses 
D)  is the same as a performance report

Exam 24: Responsibility Accounting and Performance Evaluation

Goal congruence is the practice of comparing the company's achievements against the best practices in the industry.

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

A company uses a balanced scorecard and has established a key performance indicator for product quality. If the actual warranty claims are higher than expected, there is an indication that the quality standards have been met.

The return on investment formula focuses on the amount of operating income earned before considering other revenue and expense items, such as interest expense.

Managerial accountants can design performance evaluation systems that encourage goal congruence.

When a division is operating at capacity, the transfer price should be ________.

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

In general, calculating ROI based on the gross book value of assets gives managers an incentive to continue using old, outdated equipment.

The internal business perspective of the balanced scorecard is concerned with ________.

The term "goal congruence" refers to the ________.

List the four types of responsibility centers. For each center, state the responsibility of the manager. Type of responsibility center Responsibility of the manager

Residual income indicates how ________.

If upper management uses a short time frame to calculate ROI and RI, division managers have an incentive to take actions that will lead to an immediate increase in these measures.

A high rate of employee turnover indicates that ________.

A company's "climate for action" is a corporate culture ________.

The practice of comparing the company's achievements against the best practices in the industry is known as ________.

Because profit centers are only responsible for controlling costs, their performance reports include only information on actual costs versus budgeted costs.

A profit center responsibility report ________.

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

Cost Volume Profit Analysis

Variable Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Short-Term Business Decisions

Capital Investment Decisions

Understanding Accounting Information Systems and their Components

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