Question 1

Identify and describe the five different responsibility centers, and provide one example of each.

Accepted Answer

Cost Center: A responsibility center who

Question 2

Managers at all levels are evaluated in terms of their ability to manage their areas of responsibility in keeping with organizational goals.

Accepted Answer

A) True 
 B)False

Question 3

Employer-provided health insurance is a common type of incentive compensation.

Accepted Answer

A) True 
 B)False

Question 4

Tying compensation incentives to performance targets decreases the likelihood that the goals of responsibility centers, managers, and the entire organization will be well coordinated.

Accepted Answer

A) True 
 B)False

Question 5

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 actual total cost?

Accepted Answer

A)  $521 
B)  $595 
C)  $744 
D)  $1,031 
A)  $521 
B)  $595 
C)  $744 
D)  $1,031

Question 6

Why might stock options not be the best way to promote coordination of goals?

Accepted Answer

A)  Stock prices can fluctuate quickly. 
B)  Many of the variables that affect stock prices are beyond a manager's control. 
C)  Employees generally do not value stock options very highly. 
D)  None of these choices 
A)  Stock prices can fluctuate quickly. 
B)  Many of the variables that affect stock prices are beyond a manager's control. 
C)  Employees generally do not value stock options very highly. 
D)  None of these choices

Question 7

A variable costing income statement is the same as

Accepted Answer

A)  a contribution margin income statement. 
B)  a traditional income statement. 
C)  a cost-volume-profit income statement. 
D)  none of these choices. 
A)  a contribution margin income statement. 
B)  a traditional income statement. 
C)  a cost-volume-profit income statement. 
D)  none of these choices.

Question 8

How is the contribution margin calculated when utilizing variable costing?

Accepted Answer

A)  Sales less variable cost of goods sold 
B)  Sales less variable cost of goods sold, less variable selling and administrative expenses 
C)  Sales less cost of goods sold 
D)  Sales less variable cost of goods sold, less variable selling and administrative expenses, less fixed cost of goods sold, less fixed selling and administrative expenses 
A)  Sales less variable cost of goods sold 
B)  Sales less variable cost of goods sold, less variable selling and administrative expenses 
C)  Sales less cost of goods sold 
D)  Sales less variable cost of goods sold, less variable selling and administrative expenses, less fixed cost of goods sold, less fixed selling and administrative expenses

Question 9

A manager can improve ROI by doing which of the following?

Accepted Answer

A)  Decreasing assets 
B)  Increasing sales 
C)  Decreasing costs 
D)  All of these choices 
A)  Decreasing assets 
B)  Increasing sales 
C)  Decreasing costs 
D)  All of these choices

Question 10

One of the overall goals of the Pancake House Restaurant is customer satisfaction. In the light of that goal, match the learning and growth perspective with the appropriate objective.

Accepted Answer

A)  Customer satisfaction means that the chefs engage in culinary continuing education. 
B)  Customer satisfaction means that customers receive their food within 10 minutes of placing an order. 
C)  Customer satisfaction means that the customer appreciation program is successful. 
D)  Customer satisfaction means that the restaurant is profitable. 
A)  Customer satisfaction means that the chefs engage in culinary continuing education. 
B)  Customer satisfaction means that customers receive their food within 10 minutes of placing an order. 
C)  Customer satisfaction means that the customer appreciation program is successful. 
D)  Customer satisfaction means that the restaurant is profitable.

Question 11

The manager of Center A is responsible for generating cash inflows and incurring costs with the goal of making money for the company. The manager has no responsibility for assets. What type of responsibility center is Center A?

Accepted Answer

A)  Cost center 
B)  Discretionary cost center 
C)  Profit center 
D)  Revenue center 
A)  Cost center 
B)  Discretionary cost center 
C)  Profit center 
D)  Revenue center

Question 12

An organization's four basic stakeholder groups include investors, employees, external business processes, and customers.

Accepted Answer

A) True 
 B)False

Question 13

Performance reports allow comparisons between actual performance and budget expectations.

Accepted Answer

A) True 
 B)False

Question 14

Cost of capital is the maximum desired rate of return on a particular investment.

Accepted Answer

A) True 
 B)False

Question 15

Using the following information, prepare a single report setting forth the variable costing income statement as well as a performance report for Profit Center West.

Accepted Answer

The answer of Using the following information, prepare a single...

Question 16

Why are managers more likely to achieve their objectives in both the short term and the long term when they utilize a tool such as the balanced scorecard?

Accepted Answer

Managers are more likely to achieve thei

Question 17

A responsibility center in which the relationship between resources and products or services produced is not well defined is known as a(n)

Accepted Answer

A)  investment center. 
B)  profit center. 
C)  cost center. 
D)  discretionary cost center. 
A)  investment center. 
B)  profit center. 
C)  cost center. 
D)  discretionary cost center.

Question 18

As the staff accountant for Investment Centers Beta and Gamma, compute the residual income for each investment center, using the following information:
 $\begin{array}{lrr} 
& \text { Beta } & \text { Gamma } \
\text { Operating income } & \$ 850,000 & \$ 1,000,000 \
\text { Actual ROI } & 28 \% & 49 \% \
\text { Desired ROI } & 32 \% & 35 \% \
\text { Assets invested } & \$ 585,000 & \$ 750,000 \
\hline
\end{array}$

Accepted Answer

Investment Center Beta: $850,0

Question 19

Compute the May 20xx EVA for an investment center with the following information: $\begin{array}{|lr|}
\hline \text { Pre-tax operating income for May 20xx } & \$ 18,000,500 \
\text { Income tax expense for May 20xx } & 5,100,000 \
\text { Assets at May 31, 20xx } & 13,200,500 \
\text { Current liabilities at May 31, 20xx } & 10,000,000 \
\text { Long-term liabilities at May 31, 20xx } & 3,500,000 \
\text { Minimum desired rate of return } & 19 \% \
\hline
\end{array}$

Accepted Answer

A)  $12,292,405 
B)  $12,710,500 
C)  $11,931,500 
D)  $12,235,500 
A)  $12,292,405 
B)  $12,710,500 
C)  $11,931,500 
D)  $12,235,500

Question 20

Compute the asset turnover (rounded to two decimal places) for the Tim Tom investment center as shown below. $\begin{array}{|l|r|}
\hline {\text { Tim Tom Subsidiary }} \
\hline \text { Total sales } & \$ 1,600 \
\text { Operating income } & \$ 100 \
\text { Average assets invested } & \$ 900 \
\text { Profit margin } & ? \
\text { Asset turnover } & ? \
\text { ROI } & ? \
\hline
\end{array}$

Accepted Answer

A)  1.78 
B)  0.56 
C)  0.11 
D)  9.00 
A)  1.78 
B)  0.56 
C)  0.11 
D)  9.00

Exam 25: Performance Management and Evaluation

Identify and describe the five different responsibility centers, and provide one example of each.

Managers at all levels are evaluated in terms of their ability to manage their areas of responsibility in keeping with organizational goals.

Employer-provided health insurance is a common type of incentive compensation.

Tying compensation incentives to performance targets decreases the likelihood that the goals of responsibility centers, managers, and the entire organization will be well coordinated.

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 actual total cost?

Why might stock options not be the best way to promote coordination of goals?

A variable costing income statement is the same as

How is the contribution margin calculated when utilizing variable costing?

A manager can improve ROI by doing which of the following?

One of the overall goals of the Pancake House Restaurant is customer satisfaction. In the light of that goal, match the learning and growth perspective with the appropriate objective.

The manager of Center A is responsible for generating cash inflows and incurring costs with the goal of making money for the company. The manager has no responsibility for assets. What type of responsibility center is Center A?

An organization's four basic stakeholder groups include investors, employees, external business processes, and customers.

Performance reports allow comparisons between actual performance and budget expectations.

Cost of capital is the maximum desired rate of return on a particular investment.

Using the following information, prepare a single report setting forth the variable costing income statement as well as a performance report for Profit Center West.

Why are managers more likely to achieve their objectives in both the short term and the long term when they utilize a tool such as the balanced scorecard?

A responsibility center in which the relationship between resources and products or services produced is not well defined is known as a(n)

As the staff accountant for Investment Centers Beta and Gamma, compute the residual income for each investment center, using the following information: Beta Gamma Operating income \ 850,000 \ 1,000,000 Actual ROI 28\% 49\% Desired ROI 32\% 35\% Assets invested \ 585,000 \ 750,000

Compute the asset turnover (rounded to two decimal places) for the Tim Tom investment center as shown below. Tim Tom Subsidiary Total sales \ 1,600 Operating income \ 100 Average assets invested \ 900 Profit margin ? Asset turnover ? ROI ?

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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