Exam 11: Decentralization, Performance Evaluation, and the Balanced Scorecard

FMI is a car manufacturer. Recently, they have had to recall approximately 6,000 cars due to potential brake pad malfunction. The costs to inspect and replace the brake pads would most likely be classified as which type of quality cost?

Mahim Products has a division that generated $10,000,000 in sales and operating income of $1,700,000 on average operating assets of $6,000,000. The company's management team expects division managers to generate sufficient income to guarantee a minimum return of 30 percent. Required:

Which of the following is often not a disadvantage of decentralization?

Which of the following is not one of the perspectives that is usually examined under the balanced scorecard approach?

What are the four perspectives looked at by the balanced scorecard approach?

Describe the internal business perspective of the balanced scorecard and provide an example of a critical success factor for this perspective.

External failure costs include:

CLR Inc. is a clothing manufacturer. Recently, CLR made and produced about 2,000 shirts. During the production process, some of the shirts did not have the required number of buttons sewed on. CLR has decided to rework the shirts to add the buttons. These rework costs would most likely be classified as which type of quality cost?

Manufacturing cycle efficiency (MCE) is calculated as follows:

Which of the following statements about quality costs is true?

Describe and explain the two types of fixed costs classifications that are found when a company prepares a segmented income statement as opposed to a variable costing income statement.

The rate of return generated by an investment center's assets is called:

Which types of quality costs are incurred to eliminate quality problems before they occur?

Describe one method that a company might use to improve or monitor the quality of its products or services.

Finley Company has its company headquarters based in Raleigh, North Carolina, and has six individual retail stores spread throughout North Carolina and Virginia. Which of the following costs would most likely be treated as a common cost for segmented reporting purposes?

Residual income:

When should residual income not be used to compare the performance of two investment centers?

Shannon Pharmaceuticals has the following information available for one of its divisions in the current year: The company requires each of its divisions to generate a minimum return of 30%. What is this division's residual income?

Which of the following statements about the balanced scorecard approach is false?

How do the roles of cost center managers, revenue center managers, profit center managers, and investment center managers differ?