Question 1

Which of the following can increase a company's return on investment?

Accepted Answer

A)  decrease in operating income 
B)  decrease in total assets 
C)  decrease in asset turnover ratio 
D)  decrease in residual income 
A)  decrease in operating income 
B)  decrease in total assets 
C)  decrease in asset turnover ratio 
D)  decrease in residual income

Question 2

Which of the following is the correct formula for calculating residual income?

Accepted Answer

A)  Weighted average cost of capital - Net operating profit after tax 
B)  Operating income - Minimum acceptable operating income 
C)  Historical cost of assets - Accumulated depreciation 
D)  Operating income / Average assets 
A)  Weighted average cost of capital - Net operating profit after tax 
B)  Operating income - Minimum acceptable operating income 
C)  Historical cost of assets - Accumulated depreciation 
D)  Operating income / Average assets

Question 3

To adequately evaluate an investment center's financial performance, summary performance measures should include both the division's operating income and its assets.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following managers is likely to have the most diverse responsibilities?

Accepted Answer

A)  the manager of a cost center 
B)  the manager of a profit center 
C)  the manager of an investment center 
D)  the manager of a revenue center 
A)  the manager of a cost center 
B)  the manager of a profit center 
C)  the manager of an investment center 
D)  the manager of a revenue center

Question 5

The production line of a manufacturing company is most likely to be considered to be a(n) ________.

Accepted Answer

A)  cost center 
B)  profit center 
C)  revenue center 
D)  investment center 
A)  cost center 
B)  profit center 
C)  revenue center 
D)  investment center

Question 6

List and briefly discuss the two limitations of financial performance measures.

Accepted Answer

Measurement issues-Both the return on in

Question 7

Fill in the blank with the phrase that best completes the sentence.
-The maintenance department at the local museum is a(n) ________.

Accepted Answer

A) responsibility center 
B) cost center 
C) investment center 
D) revenue center 
E) profit center 
A) responsibility center 
B) cost center 
C) investment center 
D) revenue center 
E) profit center

Question 8

State the strategy for each of the perspectives of the balanced scorecard.
 $\begin{array}{|l|l|}
\hline\begin{array}{c}
\text { Balanced scorecard } \
\text { perspective }
\end{array} & \text { Strategy }\ 
\hline \text { Financial } &  \
\
\hline \text { Customer } & \
\
\hline \text { Internal business } & \
& \
\hline \text { Learning and } & \
\text { growth } & \
\
\hline
\end{array}$

Accepted Answer

None

Question 9

Which of the following is a responsibility that is common to the managers of cost, profit, and investment centers?

Accepted Answer

A)  generating revenues 
B)  generating profits 
C)  managing the invested capital 
D)  controlling costs 
A)  generating revenues 
B)  generating profits 
C)  managing the invested capital 
D)  controlling costs

Question 10

Define cost-based transfer price. When should cost-based transfer pricing be used? Explain your answer.

Accepted Answer

Cost-based transfer price is a transfer

Question 11

A cost center responsibility report ________.

Accepted Answer

A)  includes depreciation expense 
B)  typically focuses on the flexible budget variance 
C)  is the same as a performance report 
D)  shows all costs incurred by the department 
A)  includes depreciation expense 
B)  typically focuses on the flexible budget variance 
C)  is the same as a performance report 
D)  shows all costs incurred by the department

Question 12

Responsibility accounting can help managers identify the causes of variances, thereby allowing them to determine what was controllable.

Accepted Answer

A) True 
 B)False

Question 13

The payroll department of a manufacturing company is most likely to be a(n) ________.

Accepted Answer

A)  cost center 
B)  revenue center 
C)  investment center 
D)  profit center 
A)  cost center 
B)  revenue center 
C)  investment center 
D)  profit center

Question 14

Mazuka, Inc. has a division that manufactures a component that sells for $150 and has a variable cost of $45. Another division of the company wants to purchase the component. Fixed cost per unit of the component is $20. What is the transfer price if the division is operating at full capacity?

Accepted Answer

A)  $65 
B)  $170 
C)  $150 
D)  $20 
A)  $65 
B)  $170 
C)  $150 
D)  $20

Question 15

Vasquez 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. $$\begin{array}{l}
\text { Revenue Center Respansibility Repart }\
\begin{array} { |c | c | c | l | l | l | l | l |} 
\hline \begin{array} { c } 
\text { Product } \
\text { Type }
\end{array} & \begin{array} { c } 
\text { Actual } \
\text { Sales } \
\text { Revenue }
\end{array} & \begin{array} { c } 
\text { Flexible } \
\text { Budget } \
\text { Variance }
\end{array} & \text { U/F } & \begin{array} { c } 
\text { Flexible } \
\text { Budget }
\end{array} & \begin{array} { c } 
\text { Sales } \
\text { Volume } \
\text { Variance }
\end{array} & \text { U/F } & \begin{array} { c } 
\text { Static } \
\text { Budget }
\end{array} \
\hline 40 \text { inch } & \$ 31,500 & & & \$ 30,750 & & & \$ 40,600 \
\hline 36 \text { inch long } & 40,150 & & & 42,100 & & & 33,000 \
\hline 36 \text { inch short } & 36,100 & & & 33,200 & & & 31,000 \
\hline \text { 32 inch } & 19,100 & & & 20,300 & & & 28,450 \
\hline
\end{array}
\end{array}$$ What is the sales volume variance for the 36-inch long pipe?

Accepted Answer

A)  $1950 U 
B)  $9100 F 
C)  $9850 U 
D)  $750 F 
A)  $1950 U 
B)  $9100 F 
C)  $9850 U 
D)  $750 F

Question 16

Which of the following is most likely to appear on the responsibility report for a manufacturing production supervisor?

Accepted Answer

A)  direct labor costs 
B)  factory rent 
C)  advertising costs 
D)  depreciation 
A)  direct labor costs 
B)  factory rent 
C)  advertising costs 
D)  depreciation

Question 17

For a centralized company, the major planning and controlling decisions are made by top management.

Accepted Answer

A) True 
 B)False

Question 18

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 19

Which of the following is a NOT a decision that management must make before calculating ROI and RI?

Accepted Answer

A)  Should nonproductive assets be included in the average total asset calculation? 
B)  Should gross book value or net book value of assets be used? 
C)  Should a simple average of the beginning and ending total liabilities be used? 
D)  Should a short term focus be used? 
A)  Should nonproductive assets be included in the average total asset calculation? 
B)  Should gross book value or net book value of assets be used? 
C)  Should a simple average of the beginning and ending total liabilities be used? 
D)  Should a short term focus be used?

Question 20

In a decentralized company, segment managers may not fully understand the big picture when making decisions.

Accepted Answer

A) True 
 B)False

Exam 24: Responsibility Accounting and Performance Evaluation

Which of the following can increase a company's return on investment?

Which of the following is the correct formula for calculating residual income?

To adequately evaluate an investment center's financial performance, summary performance measures should include both the division's operating income and its assets.

Which of the following managers is likely to have the most diverse responsibilities?

The production line of a manufacturing company is most likely to be considered to be a(n) ________.

List and briefly discuss the two limitations of financial performance measures.

Fill in the blank with the phrase that best completes the sentence. -The maintenance department at the local museum is a(n) ________.

State the strategy for each of the perspectives of the balanced scorecard. Balanced scorecard perspective Strategy Financial Customer Internal business Learning and growth

Which of the following is a responsibility that is common to the managers of cost, profit, and investment centers?

Define cost-based transfer price. When should cost-based transfer pricing be used? Explain your answer.

A cost center responsibility report ________.

Responsibility accounting can help managers identify the causes of variances, thereby allowing them to determine what was controllable.

The payroll department of a manufacturing company is most likely to be a(n) ________.

Mazuka, Inc. has a division that manufactures a component that sells for $150 and has a variable cost of $45. Another division of the company wants to purchase the component. Fixed cost per unit of the component is $20. What is the transfer price if the division is operating at full capacity?

Which of the following is most likely to appear on the responsibility report for a manufacturing production supervisor?

For a centralized company, the major planning and controlling decisions are made by top management.

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

Which of the following is a NOT a decision that management must make before calculating ROI and RI?

In a decentralized company, segment managers may not fully understand the big picture when making decisions.

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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