Question 1

The profit margin controllable by the segment manager would not include:

Accepted Answer

A)  variable operating expenses. 
B)  fixed expenses controllable by the segment manager. 
C)  a share of the company's common fixed expenses. 
D)  income tax expense. 
E)  a share of the company's common fixed expenses and income tax expense. 
A)  variable operating expenses. 
B)  fixed expenses controllable by the segment manager. 
C)  a share of the company's common fixed expenses. 
D)  income tax expense. 
E)  a share of the company's common fixed expenses and income tax expense. E

Question 2

Distinguishing between controllable and noncontrollable costs on a performance report may result in:

Accepted Answer

A)  an increase in the effectiveness of a cost management system. 
B)  a decrease in goal congruent behavior by managers. 
C)  an increase in the quality of performance information. 
D)  an increase in feelings of blame by managers. 
E)  an increase in the effectiveness of a cost management system and an increase in the quality of performance information. 
A)  an increase in the effectiveness of a cost management system. 
B)  a decrease in goal congruent behavior by managers. 
C)  an increase in the quality of performance information. 
D)  an increase in feelings of blame by managers. 
E)  an increase in the effectiveness of a cost management system and an increase in the quality of performance information. E

Question 3

Bob's Burgers and Such, a national fast-food chain, has experienced a number of problems in the past few years, and management is considering the adoption of a balanced scorecard as part of a turnaround effort.
Required:
A. Briefly explain the concept of a balanced scorecard. What general factors are included in a typical balanced scorecard?
B. Independent of your answer in requirement "A," assume that Bob's is very concerned about customer satisfaction. List four different (and specific) customer-satisfaction measures that may be appropriate for the firm (and for other fast-food providers).
C. Independent of requirement "A," assume that Bob's wants to return to former levels of profitability. List several financial measures that would allow management to assess success or failure with respect to the following goals: (1) pay creditors on a timely basis, (2) keep shareholders happy, and (3) improve profitability over time at stores that have been open at least one year.

Accepted Answer

A. A balanced scorecard is a tool that incorporates a variety of different measures in the performance-evaluation process. The measures are critical to a firm's success and are tied to organizational strategy. The goal of a balanced scorecard is to allow improvement in a number of broad-reaching areas rather than permit a manager to improve only a small facet of the business at the expense of others. Typical factors are often divided into four categories: financial, internal operations, customer, and learning and growth?
B. Answers will vary but often include market share, queue time, results of a customer quality survey, number of customer complaints, number of order errors, and number of repeat customers.
C. Pay creditors on a timely basis: stipulated end-of-period cash balance and current ratio.
Shareholder satisfaction: growth in earnings per share, increases in per-share market price of Bob's stock, price-earnings ratio.
Profitability improvement: gross margin growth rates, earnings growth rates.

Question 4

A cost center manager:

Accepted Answer

A)  does not have the ability to produce revenue. 
B)  may be involved with the sale of new marketing programs to clients. 
C)  would normally be held accountable for producing an adequate return on invested capital. 
D)  often oversees divisional operations. 
E)  may be the manager who oversees the operations of a retail store. 
A)  does not have the ability to produce revenue. 
B)  may be involved with the sale of new marketing programs to clients. 
C)  would normally be held accountable for producing an adequate return on invested capital. 
D)  often oversees divisional operations. 
E)  may be the manager who oversees the operations of a retail store.

Question 5

A manufacturer's raw-material purchasing department would likely be classified as a:

Accepted Answer

A)  cost center. 
B)  revenue center. 
C)  profit center. 
D)  investment center. 
E)  contribution center. 
A)  cost center. 
B)  revenue center. 
C)  profit center. 
D)  investment center. 
E)  contribution center.

Question 6

The concepts and tools used to measure the performance of people and departments are known as:

Accepted Answer

A)  goal congruence. 
B)  planning and control. 
C)  responsibility accounting. 
D)  delegation of decision making. 
E)  strategic control. 
A)  goal congruence. 
B)  planning and control. 
C)  responsibility accounting. 
D)  delegation of decision making. 
E)  strategic control.

Question 7

Which of the following would have a low likelihood of being organized as a profit center?

Accepted Answer

A)  A movie theater of a company that operates a chain of theaters. 
B)  A maintenance department that charges users for its services. 
C)  The billing department of an Internet Services Provider (ISP). 
D)  The mayor's office in a large city. 
E)  Both the billing department of an Internet Services Provider (ISP) and the mayor's office in a large city. 
A)  A movie theater of a company that operates a chain of theaters. 
B)  A maintenance department that charges users for its services. 
C)  The billing department of an Internet Services Provider (ISP). 
D)  The mayor's office in a large city. 
E)  Both the billing department of an Internet Services Provider (ISP) and the mayor's office in a large city.

Question 8

An allocation base for a cost pool should ideally be a cost object.

Accepted Answer

A) True 
 B)False

Question 9

Common costs:

Accepted Answer

A)  are not easily related to a segment's activities. 
B)  are easily related to a segment's activities. 
C)  are charged to a company's operating segments when preparing a segmented income statement. 
D)  are not charged to a company's operating segments when preparing a segmented income statement. 
E)  are not easily related to a segment's activities and also are not charged to a company's operating segments when preparing a segmented income statement. 
A)  are not easily related to a segment's activities. 
B)  are easily related to a segment's activities. 
C)  are charged to a company's operating segments when preparing a segmented income statement. 
D)  are not charged to a company's operating segments when preparing a segmented income statement. 
E)  are not easily related to a segment's activities and also are not charged to a company's operating segments when preparing a segmented income statement.

Question 10

The following information was taken from the segmented income statement of Restin, Inc., and the company's three divisions: $\begin{array}{cccc} 
&& \text { Los } & \text { Bay } & \text { Central } \
&\text { Restin, } & \text { Angeles } & \text { Area } & \text { Valley } \
&\text { Inc. } & \text { Division } & \text { Division } & \text { Division }\\hline
\text { Revenues } & \$ 750,000 & \$ 200,000 & \$ 235,000 & \$ 325,000 \
\text { Variable operating expenses } & 410,000 & 110,000 & 120,000 & 180,000 \
\text { Controllable fixed expenses } & 210,000 & 65,000 & 75,000 & 70,000 \
\text { Noncontrollable fixed expenses } & 60,000 & 15,000 & 20,000 & 25,000
\end{array}$ In addition, the company incurred common fixed costs of $18,000.
Assume that the Los Angeles division increases its promotion expense, a controllable fixed cost, by $10,000. As a result, revenues increased by $50,000. If variable expenses are tied directly to revenues, the new Los Angeles segment contribution margin is:

Accepted Answer

A)  $12,500. 
B)  $22,500. 
C)  $32,500. 
D)  $50,000. 
E)  $60,000. 
A)  $12,500. 
B)  $22,500. 
C)  $32,500. 
D)  $50,000. 
E)  $60,000.

Question 11

A revenue center manager:

Accepted Answer

A)  does not have the ability to produce revenue. 
B)  may be involved with the sale of new marketing programs to clients. 
C)  would normally be held accountable for producing an adequate return on invested capital. 
D)  often oversees divisional operations. 
E)  may be the manager who oversees the operations of a retail store. 
A)  does not have the ability to produce revenue. 
B)  may be involved with the sale of new marketing programs to clients. 
C)  would normally be held accountable for producing an adequate return on invested capital. 
D)  often oversees divisional operations. 
E)  may be the manager who oversees the operations of a retail store.

Question 12

The typical balanced scorecard is best described as containing both financial and nonfinancial performance measures.

Accepted Answer

A) True 
 B)False

Question 13

Performance reports help managers use management by exception and effectively control operations.

Accepted Answer

A) True 
 B)False

Question 14

On a segmented income statement, common fixed expenses will have an effect on a company's:

Accepted Answer

A)  segment contribution margin. 
B)  profit margin controllable by the segment manager. 
C)  segment profit margin. 
D)  segment contribution margin and segment profit margin. 
E)  None of the other answers are correct. 
A)  segment contribution margin. 
B)  profit margin controllable by the segment manager. 
C)  segment profit margin. 
D)  segment contribution margin and segment profit margin. 
E)  None of the other answers are correct.

Question 15

A cost object is:

Accepted Answer

A)  a collection of costs to be assigned. 
B)  a responsibility center, product, or service to which cost is to be assigned. 
C)  the tool used to charge cost dollars to user departments. 
D)  the primary function of a responsibility accounting system. 
E)  a common cost. 
A)  a collection of costs to be assigned. 
B)  a responsibility center, product, or service to which cost is to be assigned. 
C)  the tool used to charge cost dollars to user departments. 
D)  the primary function of a responsibility accounting system. 
E)  a common cost.

Question 16

Common costs are charged to a company's operating segments when preparing a segmented income statement.

Accepted Answer

A) True 
 B)False

Question 17

West Coast Electronics (WCE) operates 87 stores and has three divisions: California, Oregon, and Washington. Which of the following costs would not appear on Oregon's portion of WCE's segmented income statement?

Accepted Answer

A)  Costs related to statewide advertising contracts, negotiated by Oregon's divisional manager. 
B)  Variable sales commissions paid to Oregon's salespeople. 
C)  Compensation paid to Oregon's chief operating officer, as determined by WCE's management. 
D)  Oregon's allocated share of general WCE corporate overhead. 
E)  Compensation paid to Oregon's chief operating officer, as determined by WCE's management and Oregon's allocated share of general WCE corporate overhead. 
A)  Costs related to statewide advertising contracts, negotiated by Oregon's divisional manager. 
B)  Variable sales commissions paid to Oregon's salespeople. 
C)  Compensation paid to Oregon's chief operating officer, as determined by WCE's management. 
D)  Oregon's allocated share of general WCE corporate overhead. 
E)  Compensation paid to Oregon's chief operating officer, as determined by WCE's management and Oregon's allocated share of general WCE corporate overhead.

Question 18

Consider the following situation:
The marketing manager of Gilroy, Inc. accepted a rush order for a nonstock item from a valued customer. The manager filed the necessary paperwork with the production department, and a production manager did the same with purchasing for needed raw materials. Unfortunately, a purchasing clerk temporarily lost the paperwork; by the time it was found, it was too late to order from Gilroy's regular supplier. A new supplier was located that quoted a very attractive price.
The materials soon arrived and were found to be of poor quality, thus giving rise to a favorable materials price variance, an unfavorable materials quantity variance, and an unfavorable labor efficiency variance. These latter two variances, based on normal practice, appeared on the production manager's performance report for the period just ended.
Required:
A. Given that the company uses a responsibility accounting system, should the production manager be penalized for poor performance? Briefly discuss, keeping in mind that a production manager is generally in a very good position to control material usage and labor efficiency.
B. Should anything be done to correct the situation? If "yes," briefly explain.

Accepted Answer

A. No. Although the variances appear on

Question 19

Balanced scorecards contain a number of factors that are important to the success of a business. These factors are often divided into four categories: financial, internal operations, customer, and learning and growth?
Consider the twelve factors that follow.
1. Market share
2. Earnings per share
3. Manufacturing cycle efficiency
4. Machine downtime
5. Number of patents held
6. Employee suggestions
7. Number of repeat sales
8. Levels of inventories held
9. Number of vendors used
10. Cash flow from operations
11. Employee training hours
12. Gross margin
Required:
Determine the proper classification (financial, internal operations, customer, and learning and growth?) for each of the twelve factors listed.

Accepted Answer

The answer of Balanced scorecards contain a number of factors...

Question 20

Which of the following is not an example of a responsibility center?

Accepted Answer

A)  Cost center. 
B)  Revenue center. 
C)  Profit center. 
D)  Investment center. 
E)  Contribution center. 
A)  Cost center. 
B)  Revenue center. 
C)  Profit center. 
D)  Investment center. 
E)  Contribution center.

The profit margin controllable by the segment manager would not include:

Distinguishing between controllable and noncontrollable costs on a performance report may result in:

A cost center manager:

A manufacturer's raw-material purchasing department would likely be classified as a:

The concepts and tools used to measure the performance of people and departments are known as:

Which of the following would have a low likelihood of being organized as a profit center?

An allocation base for a cost pool should ideally be a cost object.

Common costs:

A revenue center manager:

The typical balanced scorecard is best described as containing both financial and nonfinancial performance measures.

Performance reports help managers use management by exception and effectively control operations.

On a segmented income statement, common fixed expenses will have an effect on a company's:

A cost object is:

Common costs are charged to a company's operating segments when preparing a segmented income statement.

West Coast Electronics (WCE) operates 87 stores and has three divisions: California, Oregon, and Washington. Which of the following costs would not appear on Oregon's portion of WCE's segmented income statement?

Which of the following is not an example of a responsibility center?

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behavior, and Cost Estimation

Cost-Volume-Profit Analysis

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Standard Costing and Analysis of Direct Costs

Flexible Budgeting and Analysis of Overhead Costs

Investment Centers and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Compound Interest and the Concept of Present Value

Inventory Management

Filters

Exam 12: Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

The profit margin controllable by the segment manager would not include:

Distinguishing between controllable and noncontrollable costs on a performance report may result in:

A cost center manager:

A manufacturer's raw-material purchasing department would likely be classified as a:

The concepts and tools used to measure the performance of people and departments are known as:

Which of the following would have a low likelihood of being organized as a profit center?

An allocation base for a cost pool should ideally be a cost object.

Common costs:

A revenue center manager:

The typical balanced scorecard is best described as containing both financial and nonfinancial performance measures.

Performance reports help managers use management by exception and effectively control operations.

On a segmented income statement, common fixed expenses will have an effect on a company's:

A cost object is:

Common costs are charged to a company's operating segments when preparing a segmented income statement.

West Coast Electronics (WCE) operates 87 stores and has three divisions: California, Oregon, and Washington. Which of the following costs would not appear on Oregon's portion of WCE's segmented income statement?

Which of the following is not an example of a responsibility center?

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity-Based Costing and Management

Activity Analysis, Cost Behavior, and Cost Estimation

Cost-Volume-Profit Analysis

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Standard Costing and Analysis of Direct Costs

Flexible Budgeting and Analysis of Overhead Costs

Investment Centers and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Compound Interest and the Concept of Present Value

Inventory Management

Filters