Question 1

The limitations of financial performance measures reinforce the importance of the balanced scorecard.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Flexible budgets use budgeted (or standard)costs at the actual level of activity.

Accepted Answer

A) True 
 B)False

Question 4

A radial tire manufacturer produces products in two departments-Divisions A and B.The company uses separate predetermined overhead allocation rates for each department to allocate its overhead.Divisions A and B have estimated manufacturing overhead costs of $170,000 and $350,000,respectively.Division A uses machine hours as the allocation base,and Division B uses direct labor hours as the allocation base.The total estimated machine hours were 34,000,and direct labor hours were 20,000 for the year.Calculate the departmental predetermined overhead allocation rates.(Round your answer to the nearest cent.)

Accepted Answer

A)  Division A-$5.00, Division B-$17.50 
B)  Division A-$17.50, Division B-$5.00 
C)  Division A-$8.50, Division B-$10.29 
D)  Division A-$10.29, Division B-$8.50 
A)  Division A-$5.00, Division B-$17.50 
B)  Division A-$17.50, Division B-$5.00 
C)  Division A-$8.50, Division B-$10.29 
D)  Division A-$10.29, Division B-$8.50

Question 5

Operating income alone does not indicate how efficiently a segment is using its assets.

Accepted Answer

A) True 
 B)False

Question 6

Fill in the blanks:
Direct materials cost and direct labor cost can be ________ ________ to products.Manufacturing overhead costs are ________ in cost pools and then ________ to products.

Accepted Answer

Direct materials cost and dire

Question 7

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 8

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. $$\begin{array}{l}
\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Revenue Center Respansibility Report }\
\begin{array} {| c | c | c | l | c | c | c | c| } 
\hline \begin{array} { c } 
\text { Product } \
\text { Type }
\end{array} & \begin{array} { c } 
\text { Actual } \
\text { Sales } \
\text { Revenue }
\end{array} & \begin{array} { c } 
\text { Flexible } \
\text { Budget } \
\text { Variance }
\end{array} & \text { U/F } & \begin{array} { c } 
\text { Flexible } \
\text { Budget }
\end{array} & \begin{array} { c } 
\text { Sales } \
\text { Volume } \
\text { Variance }
\end{array} & \text { U/F } & \begin{array} { c } 
\text { Static } \
\text { Budget }
\end{array} \
\hline 40 \text { inch } & \$ 31,500 & & & \$ 30,500 & & & \$ 40,600 \
\hline 36 \text { inch long } & 40,200 & & & 42,200 & & & 33,200 \
\hline 36 \text { inch short } & 36,000 & & & 33,100 & & & 31,000 \
\hline \text { 32 inch } & 19,000 & & & 20,900 & & & 28,000\
\hline
\end{array}
\end{array}$$ What is the sales volume variance for the 36-inch long pipe?

Accepted Answer

A)  $2,000 U 
B)  $9,000 F 
C)  $10,100 U 
D)  $1,000 F 
A)  $2,000 U 
B)  $9,000 F 
C)  $10,100 U 
D)  $1,000 F

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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 11

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 12

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 
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 
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 13

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 14

Investment center managers are responsible for generating profits and making use of the investment center's assets.

Accepted Answer

A) True 
 B)False

Question 15

In activity-based costing,the predetermined overhead allocation rate can be computed by ________.

Accepted Answer

A)  dividing the total estimated overhead costs by the total estimated quantity of the overhead allocation base 
B)  multiplying the actual quantity of the allocation based used by the allocated manufacturing overhead cost 
C)  dividing the total estimated overhead costs by the total estimated direct labor costs 
D)  dividing each product's total manufacturing cost by the associated number of units 
A)  dividing the total estimated overhead costs by the total estimated quantity of the overhead allocation base 
B)  multiplying the actual quantity of the allocation based used by the allocated manufacturing overhead cost 
C)  dividing the total estimated overhead costs by the total estimated direct labor costs 
D)  dividing each product's total manufacturing cost by the associated number of units

Question 16

A unique factor of responsibility accounting performance reports is the focus on responsibility and controllability.

Accepted Answer

A) True 
 B)False

Question 17

A profit center performance report includes both revenues and expenses.

Accepted Answer

A) True 
 B)False

Question 18

Decentralized companies rarely struggle to achieve goal congruence.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Regarding controllable costs,which of the following statements is incorrect?

Accepted Answer

A)  The production manager cannot make the decision to replace older equipment. 
B)  All costs are ultimately controllable at the upper levels of management. 
C)  The production manager is not responsible for avoiding waste of direct materials. 
D)  The production manager must be able to control all costs of his or her department. 
A)  The production manager cannot make the decision to replace older equipment. 
B)  All costs are ultimately controllable at the upper levels of management. 
C)  The production manager is not responsible for avoiding waste of direct materials. 
D)  The production manager must be able to control all costs of his or her department.

The limitations of financial performance measures reinforce the importance of the balanced scorecard.

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

Flexible budgets use budgeted (or standard)costs at the actual level of activity.

Operating income alone does not indicate how efficiently a segment is using its assets.

Fill in the blanks: Direct materials cost and direct labor cost can be to products.Manufacturing overhead costs are in cost pools and then to products.

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

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

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

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

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

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

Investment center managers are responsible for generating profits and making use of the investment center's assets.

In activity-based costing,the predetermined overhead allocation rate can be computed by ________.

A unique factor of responsibility accounting performance reports is the focus on responsibility and controllability.

A profit center performance report includes both revenues and expenses.

Decentralized companies rarely struggle to achieve goal congruence.

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

Regarding controllable costs,which of the following statements is incorrect?

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Short-Term Business Decisions

Capital Investment Decisions

Filters

Exam 24: Cost Allocation and Responsibility Accounting

The limitations of financial performance measures reinforce the importance of the balanced scorecard.

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

Flexible budgets use budgeted (or standard)costs at the actual level of activity.

Operating income alone does not indicate how efficiently a segment is using its assets.

Fill in the blanks: Direct materials cost and direct labor cost can be ________ ________ to products.Manufacturing overhead costs are ________ in cost pools and then ________ to products.

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

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

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

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

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

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

Investment center managers are responsible for generating profits and making use of the investment center's assets.

In activity-based costing,the predetermined overhead allocation rate can be computed by ________.

A unique factor of responsibility accounting performance reports is the focus on responsibility and controllability.

A profit center performance report includes both revenues and expenses.

Decentralized companies rarely struggle to achieve goal congruence.

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

Regarding controllable costs,which of the following statements is incorrect?

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Short-Term Business Decisions

Capital Investment Decisions

Filters

Fill in the blanks: Direct materials cost and direct labor cost can be to products.Manufacturing overhead costs are in cost pools and then to products.