Question 1

A responsibility accounting system evaluates the performance of each responsibility center and its manager.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

Measurement issues-Both the return on in

Question 3

Percentage of market share and rate of on-time deliveries are indicators of the ________ perspective.

Accepted Answer

A) quality management 
B) internal business 
C) customer 
D) learning and growth 
A) quality management 
B) internal business 
C) customer 
D) learning and growth

Question 4

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

Accepted Answer

A) defect rate 
B) employee satisfaction 
C) gross margin growth 
D) number of repeat customers 
A) defect rate 
B) employee satisfaction 
C) gross margin growth 
D) number of repeat customers

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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 7

Which of the following is a key performance indicator of the internal business perspective of the balanced scorecard?

Accepted Answer

A) number of units produced per hour 
B) employee turnover 
C) cash flow 
D) number of cross-trained employees 
A) number of units produced per hour 
B) employee turnover 
C) cash flow 
D) number of cross-trained employees

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Parkinson Ladders Company provides the following financial information: $$\begin{array} { | l | r | } 
\hline \text { Income from operations } & \$ 400,000 \
\hline \text { Interest expense } & 47,000 \
\hline \text { Gains/(losses) on sale of equipment } & 3,000 \
\hline \text { Net income } & 350,000 \
\hline \text { Total assets at Jan. 1 } & 2,600,000 \
\hline \text { Total assets at Dec .31 } & 3,400,000 \
\hline
\end{array}$$ Calculate return on investment based on the information given above.(Round your answer to two decimal places. )

Accepted Answer

A) 15.38% 
B) 11.67% 
C) 13.33% 
D) 11.76% 
A) 15.38% 
B) 11.67% 
C) 13.33% 
D) 11.76%

Question 10

For each of the following responsibility centers,state the typical focus of the responsibility report and briefly discuss the focus.
 $$\begin{array} { | l | l | l | } 
\hline { \begin{array} { c } 
\text { Responsibility } \
\text { Center }
\end{array} } & \begin{array} { c } 
\text { Focus of the } \
\text { Responsibility Report }
\end{array} & \text { Brief Discussion of the Focus } \
\hline \text { Cost } & & \
\hline \text { Revenue } & & \
\hline \text { Profit } & & \
\hline
\end{array}$$

Accepted Answer

The answer of For each of the following responsibility centers,state...

Question 11

A company may prefer to use residual income over return on investment for performance evaluation because ________.

Accepted Answer

A) residual income is a ratio but return on investment is an absolute figure 
B) residual income is more likely to lead to goal congruence than return on investment is 
C) residual income is easier to calculate than return on investment 
D) residual income considers three elements but return on investment considers only two elements 
A) residual income is a ratio but return on investment is an absolute figure 
B) residual income is more likely to lead to goal congruence than return on investment is 
C) residual income is easier to calculate than return on investment 
D) residual income considers three elements but return on investment considers only two elements

Question 12

Crystal Company,a manufacturer of office supplies,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 13

In a decentralized company,all the planning and controlling decisions are made by top management.

Accepted Answer

A) True 
 B)False

Question 14

Revenue center responsibility reports show all costs incurred by the department and are useful when management needs to know the full cost of operating the department.

Accepted Answer

A) True 
 B)False

Question 15

Residual income is used as a key performance indicator for evaluating an investment center's financial performance.

Accepted Answer

A) True 
 B)False

Question 16

How is the use of a balanced scorecard as a performance evaluation system helpful to companies?

Accepted Answer

The balanced scorecard represents a majo

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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?

Accepted Answer

A) return on investment 
B) number of repeat customers 
C) net profit margin 
D) sales revenue growth 
A) return on investment 
B) number of repeat customers 
C) net profit margin 
D) sales revenue growth

Question 19

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

Accepted Answer

A) hours of employee training 
B) number of warranty claims received 
C) percentage of market share 
D) return on investment 
A) hours of employee training 
B) number of warranty claims received 
C) percentage of market share 
D) return on investment

Question 20

Profit center responsibility reports include ________.

Accepted Answer

A) revenues only 
B) invested capital 
C) both revenues and expenses 
D) returns on investments 
A) revenues only 
B) invested capital 
C) both revenues and expenses 
D) returns on investments

Exam 24: Responsibility Accounting and Performance Evaluation

A responsibility accounting system evaluates the performance of each responsibility center and its manager.

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

Percentage of market share and rate of on-time deliveries are indicators of the ________ perspective.

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

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

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

Which of the following is a key performance indicator of the internal business perspective of the balanced scorecard?

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

For each of the following responsibility centers,state the typical focus of the responsibility report and briefly discuss the focus. Responsibility Center Focus of the Responsibility Report Brief Discussion of the Focus Cost Revenue Profit

A company may prefer to use residual income over return on investment for performance evaluation because ________.

In a decentralized company,all the planning and controlling decisions are made by top management.

Revenue center responsibility reports show all costs incurred by the department and are useful when management needs to know the full cost of operating the department.

Residual income is used as a key performance indicator for evaluating an investment center's financial performance.

How is the use of a balanced scorecard as a performance evaluation system helpful to companies?

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

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?

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

Profit center responsibility reports include ________.

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

Filters