Question 1

A variable costing income statement is essentially the same as a traditional income statement.

Accepted Answer

A) True 
 B)False

Question 2

What type of incentive compensation is utilized to motivate employees to achieve financial targets that increase the company's stock price?

Accepted Answer

A)  Profit-sharing plans 
B)  Awards 
C)  Cash bonuses 
D)  Stock option programs

Question 3

The manager of Center E provides human resource support for the other centers in the company.What type of responsibility center is Center E?

Accepted Answer

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

Question 4

A performance management and evaluation system is utilized so that a company can identify which of the following?

Accepted Answer

A)  How well it is doing and where it is going 
B)  How satisfied investors are with their return on investment 
C)  How satisfied both customers and employees are 
D)  How well it is doing, where it is going, and what improvements will bring in more profit

Question 5

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 6

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

Accepted Answer

A) True 
 B)False

Question 7

Use the following performance report for a profit center of the Wet Cat Food Company for the month ended December 31 to answer the question below.  What were the actual sales?

Accepted Answer

A)  $180 
B)  $200 
C)  $220 
D)  $240

Question 8

Compute the current liabilities for the Yi Yo investment center as shown below. $\begin{array}{lr}
 & \text { Yi Yo Subsidiary } \
\text { Total sales } & \$ 18,000 \
\text { After-tax operating income } & \$ 1,000 \
\text { Total assets } & \$ 15,000 \
\text { Current liabilities } & \$ ? \
\text { Total assets - current liabilities } & \$ 3,500 \
\text { Cost of capital } & 15 \% \
\text { Ficnnnmic value ardlerl } &?
\end{array}$

Accepted Answer

A)  $475 
B)  $525 
C)  $1,000 
D)  $11,500

Question 9

Responsibility accounting is more concerned with performance evaluation than performance management.

Accepted Answer

A) True 
 B)False

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.

Question 11

For purposes of computing EVA,the minimum desired rate or return on an investment is known as

Accepted Answer

A)  ROI. 
B)  cost of capital. 
C)  residual income. 
D)  profit margin.

Question 12

ROI,residual income,and economic value added all represent performance measures that can be utilized to determine investment center performance.

Accepted Answer

A) True 
 B)False

Question 13

Compute the asset turnover (rounded to two decimal places)for the Tim Tom investment center as shown below. $$\begin{array} { l r } 
& \text { Tim Tom subsidiary } \
\text { Total sales } & 1,600  \
\text { Operating income } & \$ 100\
\text { Average as5ets invested }&\$900 \
\text { Profit marpin } & \text { ? } \
\text { A55et turnever } & \text { ? } \
\text { ROI }& \text { ? } 
\end{array}$$

Accepted Answer

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

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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.

Question 16

A good example of a profit center would be

Accepted Answer

A)  a car manufacturer's assembly line. 
B)  a local Home Depot store. 
C)  Avis Car Rental's national reservation center. 
D)  a manufacturer's human resources department.

Question 17

A manager can improve EVA by

Accepted Answer

A)  increasing assets and decreasing costs. 
B)  increasing sales and assets. 
C)  increasing cost of capital and assets. 
D)  decreasing assets and lowering cost of capital.

Question 18

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.

Question 19

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

Question 20

Chow Company has a number of investment centers to track on a day-to-day basis.The following represent key figures related to one of Chow's investment centers for May 20xx: $$\begin{array} { l r } 
\text { Operating income } & \$ 6,000,000 \
\text { Sales } & 15,000,000 \
\text { As5et turnover } & 55 \%
\end{array}$$ What is the investment center's ROI for May 20xx (rounded to two decimal places)?

Accepted Answer

A)  27.5 percent 
B)  33 percent 
C)  55 percent 
D)  22 percent

Exam 22: Performance Management and Evaluation

A variable costing income statement is essentially the same as a traditional income statement.

What type of incentive compensation is utilized to motivate employees to achieve financial targets that increase the company's stock price?

The manager of Center E provides human resource support for the other centers in the company.What type of responsibility center is Center E?

A performance management and evaluation system is utilized so that a company can identify which of the following?

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.

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

Use the following performance report for a profit center of the Wet Cat Food Company for the month ended December 31 to answer the question below. What were the actual sales?

Responsibility accounting is more concerned with performance evaluation than performance management.

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.

For purposes of computing EVA,the minimum desired rate or return on an investment is known as

ROI,residual income,and economic value added all represent performance measures that can be utilized to determine investment center performance.

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

A variable costing income statement is the same as

A good example of a profit center would be

A manager can improve EVA by

The balanced scorecard was developed by

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