Question 1

Uncontrollable costs are the costs that can be influenced by the decisions of a manager.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Howard Consumer Products has a small car division that operates as a profit center.Below is a partially completed responsibility report for the first quarter.Complete the responsibility report.(Round percentages to one decimal place. )
Howard Consumer Products
Responsibility Report
 $$\begin{array} { l r r r r } 
\begin{array} { c } 
\text { Product } \
\text { Type }
\end{array} & \begin{array} { c } 
\text { Actual } \
\text { Results }
\end{array} & \begin{array} { c } 
\text { Flexible } \
\text { Budget }
\end{array} & \begin{array} { c } 
\text { Flexible Budget } \
\text { Variance } \
\text { (F or U) }
\end{array} & \begin{array} { c } 
\text { Sales Volume } \
\text { Variance }
\end{array} \
\text { Sales Revenue } & \$ 688,200 & \$ 700,000 & & \
\text { Variable Expense } & \underline { 309,000 } & \underline { 320,000 } & \
\text { Contribution Margin } & & \
\text { Traceable Fixed Expense } &\underline { 371,000 } & \underline { 369,000 } \
\text { Divisional Segment Margin }
& & & &
\end{array}$$

Accepted Answer

@#LAT-DLM& 
Responsibility Report
 \[\begin{array}

Question 4

The level of employee satisfaction is a key performance indicator of the ________ perspective of a balanced scorecard.

Accepted Answer

A) financial 
B) learning and growth 
C) internal business 
D) customer 
A) financial 
B) learning and growth 
C) internal business 
D) customer

Question 5

Sales revenue growth,gross margin growth,and return on investment are the key performance indicators for the ________.

Accepted Answer

A) financial perspective 
B) customer perspective 
C) internal business perspective 
D) learning and growth perspective 
A) financial perspective 
B) customer perspective 
C) internal business perspective 
D) learning and growth perspective

Question 6

List the two factors that the financial evaluation of investment centers must measure.

Accepted Answer

@#LAT-DLM& 2.How efficiently t

Question 7

Johnson 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. $$\begin{array}{l}
\quad\quad\quad\quad\quad\quad\quad\quad\text { Revenue Center Responsibility Report }\
\begin{array} { |c | c | c | l | c | c | c | c| } 
\hline \begin{array} { c } 
\text { Product } \
\text { Type }
\end{array} & \begin{array} { c } 
\text { Actual } \
\text { Sales } \
\text { Revenue }
\end{array} & \begin{array} { c } 
\text { Flexible } \
\text { Budget } \
\text { Variance }
\end{array} & \text { U/F } & \begin{array} { c } 
\text { Flexible } \
\text { Budget }
\end{array} & \begin{array} { c } 
\text { Sales } \
\text { Volume } \
\text { Variance }
\end{array} & \text { U/F } & \begin{array} { c } 
\text { Static } \
\text { Budget }
\end{array} \
\hline 40 \text { inch } & \$ 31,700 & & & \$ 30,000 & & & \$ 40,800 \
\hline 36 \text { inch long } & 40,200 & & & 42,200 & & & 33,000 \
\hline 36 \text { inch short } & 36,000 & & & 33,100 & & & 31,100 \
\hline \text { 32 inch } & 19,100 & & & 20,900 & & & 28,000 \
\hline
\end{array}
\end{array}$$ What is the flexible budget variance for the 40-inch pipe?

Accepted Answer

A) $1,700 U 
B) $10,800 F 
C) $10,800 U 
D) $1,700 F 
A) $1,700 U 
B) $10,800 F 
C) $10,800 U 
D) $1,700 F

Question 8

The manager of a cost center is responsible for controlling costs and generating revenues for the company.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Which of the following is an expanded form of calculating return on investment?

Accepted Answer

A) Profit margin ratio × Asset turnover ratio 
B) Net profit ratio × Inventory turnover ratio 
C) Gross profit ratio × EVA 
D) Asset turnover ratio × Inventory turnover ratio 
A) Profit margin ratio × Asset turnover ratio 
B) Net profit ratio × Inventory turnover ratio 
C) Gross profit ratio × EVA 
D) Asset turnover ratio × Inventory turnover ratio

Question 11

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 12

The limitations of financial performance measures ________.

Accepted Answer

A) lead management to use a time horizon of more than five years 
B) make it difficult for companies to create goal congruence 
C) lead management to use the gross book value of assets 
D) can be overcome by taking a broader view of performance 
A) lead management to use a time horizon of more than five years 
B) make it difficult for companies to create goal congruence 
C) lead management to use the gross book value of assets 
D) can be overcome by taking a broader view of performance

Question 13

Decentralization may cause the company to duplicate certain costs or activities.

Accepted Answer

A) True 
 B)False

Question 14

The primary objective in setting transfer prices is to achieve goal congruence by selecting a price that will maximize the overall company profits.

Accepted Answer

A) True 
 B)False

Question 15

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 16

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 17

Kurtz Logistics provides the following information: $$\begin{array} { | l | r | } 
\hline \text { Operating income } & \$ 1,600,000 \
\hline \text { Net sales } & \$ 13,500,000 \
\hline \text { Average total assets } & \$ 1,850,000 \
\hline \text { Management's target rate of return } & 20 \% \
\hline
\end{array}$$ What is the company's profit margin ratio?

Accepted Answer

A) 13.7% 
B) 11.9% 
C) 86.5% 
D) 1.1% 
A) 13.7% 
B) 11.9% 
C) 86.5% 
D) 1.1%

Question 18

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 19

A cost-based transfer price considers the cost of producing the goods when determining the price.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

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

Exam 24: Responsibility Accounting and Performance Evaluation

Uncontrollable costs are the costs that can be influenced by the decisions of a manager.

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

The level of employee satisfaction is a key performance indicator of the ________ perspective of a balanced scorecard.

Sales revenue growth,gross margin growth,and return on investment are the key performance indicators for the ________.

List the two factors that the financial evaluation of investment centers must measure.

The manager of a cost center is responsible for controlling costs and generating revenues for the company.

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.

Which of the following is an expanded form of calculating return on investment?

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

The limitations of financial performance measures ________.

Decentralization may cause the company to duplicate certain costs or activities.

The primary objective in setting transfer prices is to achieve goal congruence by selecting a price that will maximize the overall company profits.

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

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

Kurtz Logistics provides the following information: Operating income \ 1,600,000 Net sales \ 13,500,000 Average total assets \ 1,850,000 Management's target rate of return 20\% What is the company's profit margin ratio?

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

A cost-based transfer price considers the cost of producing the goods when determining the price.

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

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