Question 1

Compute the average assets invested for the Hi Ho investment center as shown below.

Accepted Answer

A)  $14,350 
B)  $14,400 
C)  $14,300 
D)  $14,250 
A)  $14,350 
B)  $14,400 
C)  $14,300 
D)  $14,250

Question 2

What are some items that can affect an investment center's EVA calculation, and how can EVA be improved?

Accepted Answer

Some items that can affect an investment

Question 3

Like ROI, residual income is a performance measure displayed as a ratio.

Accepted Answer

A) True 
 B)False

Question 4

Performance measurement is the use of both quantitative and qualitative tools to gauge an organization's performance in relation to a specific goal or an expected outcome.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following performance measures is most concerned with long-term financial performance?

Accepted Answer

A)  Economic value added 
B)  Residual income 
C)  ROI 
D)  None of these choices 
A)  Economic value added 
B)  Residual income 
C)  ROI 
D)  None of these choices

Question 6

By balancing all stakeholders' needs, managers are more likely to achieve their objectives in

Accepted Answer

A)  the long term. 
B)  the short term. 
C)  the short term as well as the long term. 
D)  all areas of the organization. 
A)  the long term. 
B)  the short term. 
C)  the short term as well as the long term. 
D)  all areas of the organization.

Question 7

Compute the profit margin (rounded to nearest percent) for the Tim Tom investment center as shown below.

Accepted Answer

A)  5% 
B)  6% 
C)  8% 
D)  13% 
A)  5% 
B)  6% 
C)  8% 
D)  13%

Question 8

Determine the February 20xx residual income for an investment center with the following information: $\begin{array}{lr}
\text { Operating income for the month ended February } 28,20 \mathrm{xx} & \$ 1,800,000 \
\text { Desired ROI } & 52 \% \
\text { Actual ROI } & 38 \% \
\text { Assets invested } & \$ 18,200,000
\end{array}$

Accepted Answer

A)  ($5,116,000) 
B)  ($6,936,000) 
C)  ($7,664,000) 
D)  ($9,484,000) 
A)  ($5,116,000) 
B)  ($6,936,000) 
C)  ($7,664,000) 
D)  ($9,484,000)

Question 9

Compute the residual income for the Hi Ho investment center as shown below. $\begin{array}{|l|r|}
\hline {\text { Hi Ho Subsidiary }} \
\hline \text { Total sales } & \$ 20,000 \
\text { Operating income } & \$ 4,350 \
\text { Beginning assets invested } & \$ 14,000 \
\text { Ending assets invested } & \$ 16,000 \
\text { Average assets invested } & \$ ? \
\text { Desired ROI } & 25 \% \
\text { Residual income } & \$ ?\\hline
\end{array}$

Accepted Answer

A)  $600 
B)  $3,100 
C)  $4,350 
D)  $1,850 
A)  $600 
B)  $3,100 
C)  $4,350 
D)  $1,850

Question 10

A manager can improve the economic value of an investment center by decreasing assets.

Accepted Answer

A) True 
 B)False

Question 11

Incentive plans must be developed with input from which of the following groups?

Accepted Answer

A)  Supervisory employees 
B)  Production line employees 
C)  All employees 
D)  Human resources employees 
A)  Supervisory employees 
B)  Production line employees 
C)  All employees 
D)  Human resources employees

Question 12

Residual income is the amount of profit left after subtracting expenses of a particular investment center.

Accepted Answer

A) True 
 B)False

Question 13

Most organizations use very similar performance measures in their day-to-day business operations.

Accepted Answer

A) True 
 B)False

Question 14

Provide three examples of something that an organization might want to measure and a performance measurement that could be utilized in each example.

Accepted Answer

Answers will vary. T

Question 15

The logical linking of goals to measurable objectives and targets and the tying of appropriate compensation incentives to the achievement of such objectives and targets are critical to the successful coordination of goals.

Accepted Answer

A) True 
 B)False

Question 16

Both flexible budgeting and variable costing can be utilized to evaluate cost center performance.

Accepted Answer

A) True 
 B)False

Question 17

Use the following performance report for a cost center of the Dry Cat Food Division for the month ended December 31 to answer the question below.   What is the direct labor variance between the actual results and the flexible budget?

Accepted Answer

A)  $10 (U) 
B)  $10 (F) 
C)  $60 (U) 
D)  $60 (F) 
A)  $10 (U) 
B)  $10 (F) 
C)  $60 (U) 
D)  $60 (F)

Question 18

When developing performance measures, management must consider a number of different issues besides what to measure and how to measure.

Accepted Answer

A) True 
 B)False

Question 19

A responsibility accounting system ensures that

Accepted Answer

A)  generally accepted accounting principles reporting requirements are met. 
B)  managers will not be held responsible for items they cannot change. 
C)  99 percent of businesses utilizing such a system will be profitable. 
D)  easy correlations between revenues and costs can be drawn. 
A)  generally accepted accounting principles reporting requirements are met. 
B)  managers will not be held responsible for items they cannot change. 
C)  99 percent of businesses utilizing such a system will be profitable. 
D)  easy correlations between revenues and costs can be drawn.

Question 20

The balanced scorecard was developed by

Accepted Answer

A)  Robert S. Kaplan. 
B)  David R. Norton. 
C)  David R. Norton and Robert S. Princeton. 
D)  Robert S. Kaplan and David R. Norton. 
A)  Robert S. Kaplan. 
B)  David R. Norton. 
C)  David R. Norton and Robert S. Princeton. 
D)  Robert S. Kaplan and David R. Norton.

Exam 25: Performance Management and Evaluation

Compute the average assets invested for the Hi Ho investment center as shown below.

What are some items that can affect an investment center's EVA calculation, and how can EVA be improved?

Like ROI, residual income is a performance measure displayed as a ratio.

Performance measurement is the use of both quantitative and qualitative tools to gauge an organization's performance in relation to a specific goal or an expected outcome.

Which of the following performance measures is most concerned with long-term financial performance?

By balancing all stakeholders' needs, managers are more likely to achieve their objectives in

Compute the profit margin (rounded to nearest percent) for the Tim Tom investment center as shown below.

Determine the February 20xx residual income for an investment center with the following information: Operating income for the month ended February 28,20 \ 1,800,000 Desired ROI 52\% Actual ROI 38\% Assets invested \ 18,200,000

Compute the residual income for the Hi Ho investment center as shown below. Hi Ho Subsidiary Total sales \ 20,000 Operating income \ 4,350 Beginning assets invested \ 14,000 Ending assets invested \ 16,000 Average assets invested \ ? Desired ROI 25\% Residual income \ ?

A manager can improve the economic value of an investment center by decreasing assets.

Incentive plans must be developed with input from which of the following groups?

Residual income is the amount of profit left after subtracting expenses of a particular investment center.

Most organizations use very similar performance measures in their day-to-day business operations.

Provide three examples of something that an organization might want to measure and a performance measurement that could be utilized in each example.

The logical linking of goals to measurable objectives and targets and the tying of appropriate compensation incentives to the achievement of such objectives and targets are critical to the successful coordination of goals.

Both flexible budgeting and variable costing can be utilized to evaluate cost center performance.

Use the following performance report for a cost center of the Dry Cat Food Division for the month ended December 31 to answer the question below. What is the direct labor variance between the actual results and the flexible budget?

When developing performance measures, management must consider a number of different issues besides what to measure and how to measure.

A responsibility accounting system ensures that

The balanced scorecard was developed by

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Completing the Accounting Cycle

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Internal Control

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Contributed Capital

Long Term Liabilities

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Partnerships

The Changing Business Environment-A Managers Pers

Cost Concepts and Cost Allocation

Costing Systems: Job Order Costing

Costing Systems Process Costing

Activity-Based Systems-Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

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