Exam 24: Responsibility Accounting and Performance Evaluation

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

Dynamic Corporation provides the following financial information: Minimum acceptable operating income \ 520,000 Average total assets \ 2,000,000 Operating income \ 705,000 Return on investment 35\% Net sales \ 825,000 Calculate the residual income of Dynamic Corporation.

Roberts Logistics provides the following information: Operating income \ 1,500,000 Net sales \ 14,000,000 Average total assets \ 2,000,000 Management's target rate of return 25\% What is the company's asset turnover ratio? (Round your answer to two decimal places. )

A company uses a balanced scorecard and has established a key performance indicator for product quality.If the actual warranty claims are higher than expected,there is an indication that the quality standards have been met.

If a company allows division managers to negotiate a cost-based transfer price,it is better to use actual costs rather than standard costs.Otherwise,the selling division has no motivation to control costs.

Managerial accountants can design performance evaluation systems that encourage goal congruence.

Cost center responsibility reports generally focus on the static budget variance.

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

The performance evaluation system should provide incentives to segment managers for coordinating the activities of the subunits and directing them toward the overall company goals.Which of the following performance measurement goals has been described by this statement?

The return on investment of a company is a measure of profitability and efficiency.

A profit center responsibility report ________.

When a division is operating at capacity,the transfer price should be ________.

Carey,Inc.provides the following information: Profit margin ratio 5\% Asset turnover ratio 2 times Net sales \ 450,000 Target rate of return 9\% Calculate the return on investment.

Cardoza 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. Revenue Center Respansibility Report Product Type Actual Sales Revenue Flexible Budget Variance U/F Flexible Budget Sales Volume Variance U/F Static Budget 40 inch \ 31,500 \ 30,750 \ 40,600 36 inch long 40,150 42,100 33,000 36 inch short 36,100 33,200 31,000 32 inch 19,100 20,300 28,450 What is the sales volume variance for the 36-inch long pipe?

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

Management by exception directs the management's attention to important differences between the actual and the budgeted amounts.

Which of the following is the correct formula for the asset turnover ratio?

Opportunity cost is the benefit ________.

A high rate of employee turnover indicates that ________.

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