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

When using a balanced scorecard, a company's market share is typically classified as an element of the firm's:

Performance reports help managers:

The following data relate to Department no. 3 of Tsing Corporation: Segment contribution margin \ 540,000 Profit margin controllable by the segment manager 310,000 Segment profit margin 150,000 On the basis of this information, Department no. 3's variable operating expenses are:

Henry Company is preparing a segmented income statement, subdivided into departments (billing, purchasing, and telemarketing). Which of the following choices correctly describes the accounting treatment of the firm's compensation cost for key executives (president and vice-presidents)?

A cost pool is:

The following information was taken from the segmented income statement of Restin, Inc., and the company's three divisions: Los Bay Central Restin, Angeles Area Valley Inc. Division Division Division Revenues \ 750,000 \ 200,000 \ 235,000 \ 325,000 Variable operating expenses 410,000 110,000 120,000 180,000 Controllable fixed expenses 210,000 65,000 75,000 70,000 Noncontrollable fixed expenses 60,000 15,000 20,000 25,000 In addition, the company incurred common fixed costs of $18,000. Which of the following amounts should be used to evaluate whether Restin, Inc., should continue to invest company resources in the Los Angeles division?

A profit center manager:

Swedish Cruise Lines (SCL), which operates in a very competitive marketplace, is considering four categories of performance measures: (1) profitability measures, (2) customer-satisfaction measures, (3) efficiency and quality measures, and (4) learning and growth measures. The company assigns one manager to each ship in its fleet to oversee the ship's general operations. If SCL desired to adopt a balanced-scorecard approach, which measures should the firm use in the evaluation of its managers?

A cost center manager does not have the ability to produce revenue.

County Cable Services Inc. is organized in three segments: Metro, Suburban, and Outlying. Data for the company and for these segments follow. Variable costs as a percentage of service revenue are: Metro, 20%; Suburban, 18.75%; and Outlying, 25%. Required: A. Complete the segmented income statement for County Cable. B. Evaluate the three segment managers for consideration of a pay raise. Base the managers' performance on (1) absolute dollars of the appropriate profit measure, and (2) the appropriate profit measure as a percentage of service revenue. What causes any difference in rankings between the two approaches?

Cost pools should be charged to responsibility centers by using:

Bronze Life Corporation (BLC) manufactures decorative, sculpted accessories that are sold by interior decorators and home furnishing stores. The following situation concerns two BLC employees: Deborah Philbun, head of the company's Billing Department, and Gary Bitner, the firm's general manager. Philbun's Billing Department makes heavy use of hourly employees and is evaluated as a cost center. Understanding the need for prompt collection of receivables, Philbun strives to run a first-class operation. Philbun also understands the need to contribute in a big way to BLC's financial performance so she continually strives to minimize Billing Department expenses. Unfortunately, Philbun experienced a heated discussion with Bitner several weeks ago, the subject being the shoddy operation that she is running. Bitner complained loudly about the lack of timely billings to customers and the general lack of attention to detail, as many complaints have surfaced about erroneous invoices and customer statements. Required: A. What is meant by the term "responsibility accounting?" B. What measure(s) of performance would companies normally use to evaluate a cost-center manager? C. Does Bitner have a valid reason to be upset with Philbun? Given the nature of the Billing Department, did Philbun err in her quest to minimize expenses? Explain. D. Is it likely that the Billing Department could be evaluated as a profit center? Why?