Question 1

Expectancy theory suggests that group incentive awards that are based on company performance:

Accepted Answer

A)  Will be highly effective when the size of the group is large. 
B)  Will be highly effective because they place a high value on successful performance by the individual. 
C)  Will be relatively ineffective due to their effect on organization culture. 
D)  Will be relatively ineffective because individual managers may exert little influence on performance at the corporate level. 
A)  Will be highly effective when the size of the group is large. 
B)  Will be highly effective because they place a high value on successful performance by the individual. 
C)  Will be relatively ineffective due to their effect on organization culture. 
D)  Will be relatively ineffective because individual managers may exert little influence on performance at the corporate level.

Question 2

Wolfe & Goodwin, LLC, manufactures a variety of security devices for residential and commercial use. The company is decentralized into Residential Products and Commercial Applications divisions. For their recently concluded year, the divisions reported the following budgeted and actual amounts for a motion detector and alarm that is produced in both residential and commercial models.
   Required: 
a. Compute the sales volume and sales price variances for the Residential Products and Commercial Applications divisions with respect to the motion detector.
b. Which division recorded the better performance? Why?

Accepted Answer

Wolfe & Goodwin, LLC., manufactures a va

Question 3

The industry volume variance is useful if management lacks the authority to reallocate resources from one industry to another.

Accepted Answer

A) True 
 B)False

Question 4

In the "check" and "adjust" phases of the business planning and analysis process, managers must evaluate measured performance and decide on what changes need to be made. The evaluation process cannot begin until:

Accepted Answer

A)  Useful performance standards are established. 
B)  A SWOT analysis has been completed. 
C)  Best-in-practice external benchmarks are available. 
D)  The nature of responsibility centers is understood. 
A)  Useful performance standards are established. 
B)  A SWOT analysis has been completed. 
C)  Best-in-practice external benchmarks are available. 
D)  The nature of responsibility centers is understood.

Question 5

For performance evaluation purposes, any difference between a budgeted and actual result is classified as an unfavorable variance.

Accepted Answer

A) True 
 B)False

Question 6

A company contains several profit centers, all of which face the same numerous environmental and economic circumstances. In view of this, the company assesses the performance of it profit centers against one another rather than against budget targets. This style of performance assessment is called:

Accepted Answer

A)  Variance analysis. 
B)  Management by exception. 
C)  Activity-based management. 
D)  Relative performance evaluation. 
A)  Variance analysis. 
B)  Management by exception. 
C)  Activity-based management. 
D)  Relative performance evaluation.

Question 7

When assessing responsibility centers and their managers, performance measures are of no value unless some type of performance target or standard is available for comparison.

Accepted Answer

A) True 
 B)False

Question 8

Favoritism bias and hindsight bias are two of the significant disadvantages of:

Accepted Answer

A)  Relative performance evaluation. 
B)  Line-item variance analysis. 
C)  Subjective performance evaluation. 
D)  Profit-driver profit variance analysis. 
A)  Relative performance evaluation. 
B)  Line-item variance analysis. 
C)  Subjective performance evaluation. 
D)  Profit-driver profit variance analysis.

Question 9

A drawback of relative performance evaluation systems is:

Accepted Answer

A)  They do not require setting static budget targets. 
B)  They filter out uncontrollable effects in the environment. 
C)  They rely on benchmarks derived from the performance of similar units. 
D)  They provide no incentive for managers of different units to cooperate. 
A)  They do not require setting static budget targets. 
B)  They filter out uncontrollable effects in the environment. 
C)  They rely on benchmarks derived from the performance of similar units. 
D)  They provide no incentive for managers of different units to cooperate.

Question 10

The primary difference between a static and flexible budget is:

Accepted Answer

A)  The level of output used to derive the budgeted amounts. 
B)  That static budgets are only prepared at the level of the investment center. 
C)  That static budgets are prepared for publication in external annual reports while flexible budgets are only internal documents. 
D)  That the flexible budget is always prepared on a rolling basis. 
A)  The level of output used to derive the budgeted amounts. 
B)  That static budgets are only prepared at the level of the investment center. 
C)  That static budgets are prepared for publication in external annual reports while flexible budgets are only internal documents. 
D)  That the flexible budget is always prepared on a rolling basis.

Question 11

Subjective performance evaluation can be useful when:

Accepted Answer

A)  Important aspects of performance are difficult to measure. 
B)  Evaluating start-up businesses that show large accounting losses in early years. 
C)  A responsibility center experiences a large and unforeseen event. 
D)  All of the above would argue for subjective evaluations. 
A)  Important aspects of performance are difficult to measure. 
B)  Evaluating start-up businesses that show large accounting losses in early years. 
C)  A responsibility center experiences a large and unforeseen event. 
D)  All of the above would argue for subjective evaluations.

Question 12

Calculation of the market share variance is based on the budgeted volume for the industry in which the firm operates.

Accepted Answer

A) True 
 B)False

Question 13

In order to fix responsibility for their occurrence, and analyze their underlying causes, variances must be disaggregated.

Accepted Answer

A) True 
 B)False

Question 14

One of the reasons that group incentive awards based on improved corporate performance are popular is:

Accepted Answer

A)  The lack of correlation between corporate performance and the performance of individual responsibility center managers. 
B)  That the individual managers' motivation is largely independent of corporate performance. 
C)  That the group awards will result in reduced compensation expense and cash outflows when actual profits and cash inflows are below expectations. 
D)  That group awards function best in large organizations with numerous responsibility centers. 
A)  The lack of correlation between corporate performance and the performance of individual responsibility center managers. 
B)  That the individual managers' motivation is largely independent of corporate performance. 
C)  That the group awards will result in reduced compensation expense and cash outflows when actual profits and cash inflows are below expectations. 
D)  That group awards function best in large organizations with numerous responsibility centers.

Question 15

"Management by exception" is an approach to the "check" and "adjust" phases of the business planning analysis process that is most often focused on:

Accepted Answer

A)  Profit variances. 
B)  Unfavorable variances. 
C)  Both favorable and unfavorable variances. 
D)  Sales volume variances. 
A)  Profit variances. 
B)  Unfavorable variances. 
C)  Both favorable and unfavorable variances. 
D)  Sales volume variances.

Question 16

Abrasive Brothers, Inc., manufactures brake pads for automobiles. For April 2017, the company's static budget projected 5,000 units would be produced and sold at a variable cost of $6 per unit and total fixed costs of $12,000. The budgeted selling price was $18 per unit. Actual results for April were somewhat disappointing in that the company produced and sold only 4,200 units at an actual price of $17.50 per unit. 
-What sale price variance would the company report for April?

Accepted Answer

A)  $0.50 Unfavorable. 
B)  $14,400 Unfavorable. 
C)  $14,000 Unfavorable. 
D)  $2,100 Unfavorable. 
A)  $0.50 Unfavorable. 
B)  $14,400 Unfavorable. 
C)  $14,000 Unfavorable. 
D)  $2,100 Unfavorable.

Question 17

Management in a key investment center of VR Industries achieved a return on investment of 18% in a recently concluded year. This fell short of the investment center's targeted ROI of 20%. The difference illustrates a(n):

Accepted Answer

A)  Profit variance. 
B)  Sales volume variance. 
C)  Accounting return variance. 
D)  Line-item variance. 
A)  Profit variance. 
B)  Sales volume variance. 
C)  Accounting return variance. 
D)  Line-item variance.

Question 18

A variance analysis prepared by Morton, Inc., indicated that two of the corporation's five divisions performed quite well in the past quarter, despite poor performance by the corporation as a whole. The variances used to reach this conclusion must have been disaggregated by responsibility center.

Accepted Answer

A) True 
 B)False

Question 19

Custom Care, Inc., produces a wide variety of personal accessory products for men and women. One of the company's most popular items is a leather-covered cushioned carrying case for smartphones. The division that produces this case wants to better understand its performance over the last year and has assembled the information below to support its analysis.
   Required: 
a. Compute the sales volume variance for last year.
b. Compute the sales price variance for last year.
c. Compute the variable manufacturing cost variance for last year.

Accepted Answer

Custom Care, Inc. produces a wide variet

Question 20

A difference between a static budget amount for income and flexible budget amount is termed:

Accepted Answer

A)  A profit variance. 
B)  An accounting return variance. 
C)  A sales volume variance. 
D)  A line item variance. 
A)  A profit variance. 
B)  An accounting return variance. 
C)  A sales volume variance. 
D)  A line item variance.

Expectancy theory suggests that group incentive awards that are based on company performance:

The industry volume variance is useful if management lacks the authority to reallocate resources from one industry to another.

In the "check" and "adjust" phases of the business planning and analysis process, managers must evaluate measured performance and decide on what changes need to be made. The evaluation process cannot begin until:

For performance evaluation purposes, any difference between a budgeted and actual result is classified as an unfavorable variance.

A company contains several profit centers, all of which face the same numerous environmental and economic circumstances. In view of this, the company assesses the performance of it profit centers against one another rather than against budget targets. This style of performance assessment is called:

When assessing responsibility centers and their managers, performance measures are of no value unless some type of performance target or standard is available for comparison.

Favoritism bias and hindsight bias are two of the significant disadvantages of:

A drawback of relative performance evaluation systems is:

The primary difference between a static and flexible budget is:

Subjective performance evaluation can be useful when:

Calculation of the market share variance is based on the budgeted volume for the industry in which the firm operates.

In order to fix responsibility for their occurrence, and analyze their underlying causes, variances must be disaggregated.

One of the reasons that group incentive awards based on improved corporate performance are popular is:

"Management by exception" is an approach to the "check" and "adjust" phases of the business planning analysis process that is most often focused on:

Management in a key investment center of VR Industries achieved a return on investment of 18% in a recently concluded year. This fell short of the investment center's targeted ROI of 20%. The difference illustrates a(n):

A variance analysis prepared by Morton, Inc., indicated that two of the corporation's five divisions performed quite well in the past quarter, despite poor performance by the corporation as a whole. The variances used to reach this conclusion must have been disaggregated by responsibility center.

A difference between a static budget amount for income and flexible budget amount is termed:

Business Planning and Analysis: An Integrative Framework for Management Accounting

Measuring and Evaluating Performance

Defining and Using Cost Estimates

Cost Pools, Capacity, and Activity- Based Costing

Understanding the Management Process

Planning in the Product Domain

Assessing and Improving Product Profitability

Setting Process Expectations

Evaluating and Improving Process Performance

Setting Performance Expectations at the Entity Level

Setting Performance Expectations in Large, Complex Organizations

Setting and Achieving Targets in the Customer Domain

Strategic Cost Management and the Value Chain Domain

Filters

Exam 12: Evaluating and Improving Entity Performance

Expectancy theory suggests that group incentive awards that are based on company performance:

The industry volume variance is useful if management lacks the authority to reallocate resources from one industry to another.

In the "check" and "adjust" phases of the business planning and analysis process, managers must evaluate measured performance and decide on what changes need to be made. The evaluation process cannot begin until:

For performance evaluation purposes, any difference between a budgeted and actual result is classified as an unfavorable variance.

A company contains several profit centers, all of which face the same numerous environmental and economic circumstances. In view of this, the company assesses the performance of it profit centers against one another rather than against budget targets. This style of performance assessment is called:

When assessing responsibility centers and their managers, performance measures are of no value unless some type of performance target or standard is available for comparison.

Favoritism bias and hindsight bias are two of the significant disadvantages of:

A drawback of relative performance evaluation systems is:

The primary difference between a static and flexible budget is:

Subjective performance evaluation can be useful when:

Calculation of the market share variance is based on the budgeted volume for the industry in which the firm operates.

In order to fix responsibility for their occurrence, and analyze their underlying causes, variances must be disaggregated.

One of the reasons that group incentive awards based on improved corporate performance are popular is:

"Management by exception" is an approach to the "check" and "adjust" phases of the business planning analysis process that is most often focused on:

Management in a key investment center of VR Industries achieved a return on investment of 18% in a recently concluded year. This fell short of the investment center's targeted ROI of 20%. The difference illustrates a(n):

A variance analysis prepared by Morton, Inc., indicated that two of the corporation's five divisions performed quite well in the past quarter, despite poor performance by the corporation as a whole. The variances used to reach this conclusion must have been disaggregated by responsibility center.

A difference between a static budget amount for income and flexible budget amount is termed:

Business Planning and Analysis: An Integrative Framework for Management Accounting

Measuring and Evaluating Performance

Defining and Using Cost Estimates

Cost Pools, Capacity, and Activity- Based Costing

Understanding the Management Process

Planning in the Product Domain

Assessing and Improving Product Profitability

Setting Process Expectations

Evaluating and Improving Process Performance

Setting Performance Expectations at the Entity Level

Setting Performance Expectations in Large, Complex Organizations

Setting and Achieving Targets in the Customer Domain

Strategic Cost Management and the Value Chain Domain

Filters