Exam 24: Responsibility Accounting and Performance Evaluation

Sandpiper Inc. has a division that manufactures a component that sells for $150 and has a variable cost of $30. Another division of the company wants to purchase the component. Fixed cost per unit of the component is $20. What is the minimum transfer price if the division is operating at capacity?

List the primary goals of performance evaluation systems.

Which of the following perspectives of the balanced scorecard focuses on the increase of company profits through increasing revenue growth and productivity?

If managers are measured on short-term financial performance only, they may not introduce new products.

The following is divisional information for Kingfisher Enterprises: East Division West Division Operating income \ 250,000 \ 200,000 Net sales 2,225,000 1,575,000 Total assets at Jan. 1 1,500,000 840,000 Total assets at Dec .31 1,200,000 1,000,000 The target rate of return is 12% for the East Division and is 10% for the West Division. Compute residual income for each division.

All costs are ultimately controllable at the upper levels of management.

Explain the difference between a controllable and a noncontrollable cost.

If a market-based transfer price is used, the transfer price is based on the cost of goods sold.

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

In an investment center, the manager is primarily responsible for ________.

The responsibility report of Alejandro Garcia, the manager of one of the divisions of an auto parts manufacturing company, includes profits as well as return on investment and residual income. Alejandro is most likely the manager of a(n) ________.

The balanced scorecard system requires management to consider ________.

An investment center manager is responsible for generating profits and managing invested capital.

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

All of the following are advantages of decentralization except

Madsen, Inc. intends to increase its profits by 50% in the next fiscal year. Which of the following is most likely to be a lead indicator in Madsen's performance report?

A lag indicator is a performance measure that forecasts future performance.

Provisions Company, a manufacturer of office supplies, provides the following financial information: Pen Division Pencil Division Operating income \ 100,000 \ 40,000 Net sales \ 500,000 \ 150,000 Total assets at Jan. 1 \ 580,000 \ 350,000 Total assets at Dec. 31 \ 610,000 \ 300,000 Calculate the return on investment for the Pen Division. (Round your answer to two decimal places.)

Which responsibility center managers are responsible for both generating revenue and either controlling costs or efficiently managing invested capital?

Centralized companies split their operations into segments and top management delegates decision making to the segment managers.