Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Fill in the blank with the phrase that best completes the sentence.
-A division of a manufacturing company responsible for a particular product 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 3

The balanced scorecard ________.

Accepted Answer

A)  incorporates both financial and operational performance measures 
B)  does not consider operational performance measures 
C)  evaluates performance based on organizational participation in improving processes 
D)  treats financial indicators as the sole measurement of performance 
A)  incorporates both financial and operational performance measures 
B)  does not consider operational performance measures 
C)  evaluates performance based on organizational participation in improving processes 
D)  treats financial indicators as the sole measurement of performance

Question 4

The manager of a revenue center is responsible for generating profits.

Accepted Answer

A) True 
 B)False

Question 5

The production manager is responsible for ________.

Accepted Answer

A)  all product costs 
B)  decisions to acquire new equipment 
C)  his or her own salary 
D)  efficiently and effectively producing quality products 
A)  all product costs 
B)  decisions to acquire new equipment 
C)  his or her own salary 
D)  efficiently and effectively producing quality products

Question 6

To create goal congruence, some firms prefer calculating ROI based on the gross book value of asset.

Accepted Answer

A) True 
 B)False

Question 7

Residual income compares the division's actual operating income with the minimum operating income expected by top management for the given size of the division's average total assets.

Accepted Answer

A) True 
 B)False

Question 8

Scribe Company, a manufacturer of writing instruments, provides the following financial information: $$\begin{array} { | l | r | r | } 
\hline & \text { Pen Division } & \text { Pencil Division } \
\hline \text { Operating income } & \$ 100,000 & \$ 40,000 \
\hline \text { Net sales } & \$ 450,000 & \$ 200,000 \
\hline \text { Total assets at Jan. 1 } & \$ 560,000 & \$ 255,000 \
\hline \text { Total assets at Dec .31 } & \$ 600,000 & \$ 275,000 \
\hline
\end{array}$$ Calculate the return on investment for the Pencil Division. (Round your answer to two decimal places.)

Accepted Answer

A)  17.24% 
B)  15.09% 
C)  15.69% 
D)  14.55% 
A)  17.24% 
B)  15.09% 
C)  15.69% 
D)  14.55%

Question 9

A market-based transfer price is based on the ________ when determining the transfer price.

Accepted Answer

A)  variable costs 
B)  sales price of goods 
C)  cost of the goods 
D)  contribution margin 
A)  variable costs 
B)  sales price of goods 
C)  cost of the goods 
D)  contribution margin

Question 10

Safari Equipment Company has several divisions that are investment centers. Data for the Boat Division and the Trailer Division are shown here: $$\begin{array} { | l | r | r | } 
\hline & \text { Boat Division } & \text { Trailer Division } \
\hline \text { Operating income } & \$ 80,000 & \$ 50,000 \
\hline \text { Total assets at Jan. 1 } & \$ 680,000 & \$ 215,000 \
\hline \text { Total assets at Dec .31 } & \$ 780,000 & \$ 200,000 \
\hline
\end{array}$$ Which of the following statements would be the most meaningful interpretation of this data?

Accepted Answer

A)  The Boat Division's performance is better than that of the Trailer Division because it has higher assets. 
B)  The Boat Division uses its assets less efficiently than the Trailer Division does because it has a lower return on investment. 
C)  The Boat Division shows a more efficient use of assets than the Trailer Division because it has a higher operating income. 
D)  The Boat Division is financially more successful than the Trailer Division because it shows an increase in assets. 
A)  The Boat Division's performance is better than that of the Trailer Division because it has higher assets. 
B)  The Boat Division uses its assets less efficiently than the Trailer Division does because it has a lower return on investment. 
C)  The Boat Division shows a more efficient use of assets than the Trailer Division because it has a higher operating income. 
D)  The Boat Division is financially more successful than the Trailer Division because it shows an increase in assets.

Question 11

Which of the following would most likely be evaluated using residual income?

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 12

In many cases, the amount of the transfer price does not affect overall company profits.

Accepted Answer

A) True 
 B)False

Question 13

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 in the reports should be explained. 
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 in the reports should be explained. 
D)  Every variance, regardless of magnitude, must be investigated by the managers.

Question 14

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

Accepted Answer

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

Question 15

List two objectives in setting transfer prices.

Accepted Answer

1. Achieving goal congruence b

Question 16

Sea Cruise Equipment Company has several divisions that are investment centers. Data for the Boat Division and the Trailer Division are shown here:
 $$\begin{array} { | l | r | r | } 
\hline & \text { Boat Division } & \text { Trailer Division } \
\hline \text { Operating income } & \$ 70,000 & \$ 42,000 \
\hline \text { Total assets at Jan. 1 } & \$ 692,000 & \$ 233,000 \
\hline \text { Total assets at Dec. 31 } & \$ 700,000 & \$ 218,000 \
\hline
\end{array}$$ With regard to the efficient use of assets, the Boat Division has a higher return on investment (ROI) because it has the highest operating income.

Accepted Answer

A) True 
 B)False

Question 17

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 18

The primary objective in setting transfer prices is to ________.

Accepted Answer

A)  establish a system that determines the best transfer prices for the company as a whole 
B)  evaluate the managers of the responsibility centers involved 
C)  achieve goal congruence by selecting a price that will maximize overall company profits 
D)  make it easy for managers to select prices that maximize division profits 
A)  establish a system that determines the best transfer prices for the company as a whole 
B)  evaluate the managers of the responsibility centers involved 
C)  achieve goal congruence by selecting a price that will maximize overall company profits 
D)  make it easy for managers to select prices that maximize division profits

Question 19

Key performance indicators (KPIs) are summary performance measures that help managers assess whether the company is achieving its goals.

Accepted Answer

A) True 
 B)False

Question 20

Centralized operations are better for small companies due to the smaller scope of their operations.

Accepted Answer

A) True 
 B)False

Exam 24: Responsibility Accounting and Performance Evaluation

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

Fill in the blank with the phrase that best completes the sentence. -A division of a manufacturing company responsible for a particular product is a(n) ________.

The balanced scorecard ________.

The manager of a revenue center is responsible for generating profits.

The production manager is responsible for ________.

To create goal congruence, some firms prefer calculating ROI based on the gross book value of asset.

Residual income compares the division's actual operating income with the minimum operating income expected by top management for the given size of the division's average total assets.

A market-based transfer price is based on the ________ when determining the transfer price.

Which of the following would most likely be evaluated using residual income?

In many cases, the amount of the transfer price does not affect overall company profits.

Which of the following statements is true of performance reporting?

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

List two objectives in setting transfer prices.

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

The primary objective in setting transfer prices is to ________.

Key performance indicators (KPIs) are summary performance measures that help managers assess whether the company is achieving its goals.

Centralized operations are better for small companies due to the smaller scope of their operations.

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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