Question 1

All of the following equations represent return on investment (ROI)EXCEPT:

Accepted Answer

A) efficiency × productivity. 
B) operating income / investment. 
C) return on sales × inventory turnover. 
D) (operating income / sales)× (sales / investment). 
A) efficiency × productivity. 
B) operating income / investment. 
C) return on sales × inventory turnover. 
D) (operating income / sales)× (sales / investment). C

Question 2

A measure of operations efficiency generally divides:

Accepted Answer

A) output by input. 
B) standard revenues by standard costs. 
C) sales by cost of goods sold. 
D) sales by investment. 
A) output by input. 
B) standard revenues by standard costs. 
C) sales by cost of goods sold. 
D) sales by investment. A

Question 3

Residual income equals reported accounting income less the economic cost of the investment used to generate that income.

Accepted Answer

A) True 
 B)False  True

Question 4

Managers of profit centers are responsible for:

Accepted Answer

A) costs and investments. 
B) revenues and costs. 
C) costs, revenues, and investments. 
D) costs. 
A) costs and investments. 
B) revenues and costs. 
C) costs, revenues, and investments. 
D) costs.

Question 5

A major goal of transfer pricing is to motivate the decision maker to act in the organization's best interests.

Accepted Answer

A) True 
 B)False

Question 6

In a centralized organization:

Accepted Answer

A) local-division managers do not need higher approval for most business decisions. 
B) company-wide standard operating procedures are common. 
C) local-division managers have an opportunity to gain decision-making experience. 
D) decisions are made by local division managers. 
A) local-division managers do not need higher approval for most business decisions. 
B) company-wide standard operating procedures are common. 
C) local-division managers have an opportunity to gain decision-making experience. 
D) decisions are made by local division managers.

Question 7

The MOST likely result of decentralization is to give local-division managers the responsibility for:

Accepted Answer

A) evaluating strategic goals. 
B) allocating joint costs. 
C) operating decisions. 
D) financial control. 
A) evaluating strategic goals. 
B) allocating joint costs. 
C) operating decisions. 
D) financial control.

Question 8

Which of the following statements is FALSE regarding financial and nonfinancial measures of performance?

Accepted Answer

A) Nonfinancial measures may help to anticipate and explain financial results. 
B) Financial measures include aggregate measures. 
C) Nonfinancial measures may help to identify the causes of financial results. 
D) Financial measures are lead indicators of future success. 
A) Nonfinancial measures may help to anticipate and explain financial results. 
B) Financial measures include aggregate measures. 
C) Nonfinancial measures may help to identify the causes of financial results. 
D) Financial measures are lead indicators of future success.

Question 9

Department income totals $200,000,investment in the department is $2,000,000,and the company's cost of capital is 8%.
Required:
a. Calculate the return on investment (ROI).
b. Calculate economic value added.
c. Assume there is a capital project that requires a $200,000 investment for a $18,000 return.Would the department manager be more likely to accept the project if department performance was evaluated using ROI or economic value added? Why?

Accepted Answer

a. ROI is 10% ($200,000 department incom

Question 10

Caution should be taken when interpreting a segment margin income statement because:

Accepted Answer

A) revenues may be based on transfer prices. 
B) the interactive effects among responsibility centers are generally not clearly captured. 
C) expenses may be a result of subjective allocation of jointly incurred costs. 
D) All of the above are correct. 
A) revenues may be based on transfer prices. 
B) the interactive effects among responsibility centers are generally not clearly captured. 
C) expenses may be a result of subjective allocation of jointly incurred costs. 
D) All of the above are correct.

Question 11

Transfer prices based on actual costs provide no incentive to the supplying division to control costs.

Accepted Answer

A) True 
 B)False

Question 12

All of the following are reasons that financial control may be an ineffective scorecard EXCEPT that:

Accepted Answer

A) it fails to identify the causes or drivers of performance. 
B) it focuses on financial measures while ignoring other important attributes of performance. 
C) it focuses on long-term rather than short-term performance measures. 
D) it is an aggregate,rather than a detailed measure of performance. 
A) it fails to identify the causes or drivers of performance. 
B) it focuses on financial measures while ignoring other important attributes of performance. 
C) it focuses on long-term rather than short-term performance measures. 
D) it is an aggregate,rather than a detailed measure of performance.

Question 13

Assume the transfer price for a pair of soles is 180% of full costs of the Sole Division and 100,000 of soles are produced and transferred to the Assembly Division.The Sole Division's operating income is:

Accepted Answer

A) $1,600,000. 
B) $1,800,000. 
C) $2,560,000. 
D) $3,600,000. 
A) $1,600,000. 
B) $1,800,000. 
C) $2,560,000. 
D) $3,600,000.

Question 14

The MAJOR criticism of using return on investment (ROI)for financial control is that it:

Accepted Answer

A) gives managers an incentive to reject projects with an ROI greater than the company's required rate of return but less than the department's current ROI. 
B) usually uses the blended rate of capital as the required rate of return. 
C) encourages competition among segment managers. 
D) is a measure of overall performance. 
A) gives managers an incentive to reject projects with an ROI greater than the company's required rate of return but less than the department's current ROI. 
B) usually uses the blended rate of capital as the required rate of return. 
C) encourages competition among segment managers. 
D) is a measure of overall performance.

Question 15

Financial measures identify what is wrong with an organization,not simply provide a signal that something needs attention.

Accepted Answer

A) True 
 B)False

Question 16

Human resources costs might be allocated to individual cost centers:

Accepted Answer

A) based on the square footage each cost center uses. 
B) based on the number of employees utilized by each individual center. 
C) only if the allocation serves some decision-making purpose. 
D) never,because it is a non-cash cost that should not be allocated. 
A) based on the square footage each cost center uses. 
B) based on the number of employees utilized by each individual center. 
C) only if the allocation serves some decision-making purpose. 
D) never,because it is a non-cash cost that should not be allocated.

Question 17

The text discusses how Quaker Oats used economic value added to evaluate the practice of trade loading,which is a practice of loading up the supply line with product to last several months.This application of economic value added would focus on:

Accepted Answer

A) comparing the profit changes caused by trade loading with changes in customer satisfaction. 
B) the effect on partners in the distribution channel caused by abandoning trade loading. 
C) the difference in prices caused by trade loading. 
D) comparing the benefits and costs of trade loading with the required investment in inventory. 
A) comparing the profit changes caused by trade loading with changes in customer satisfaction. 
B) the effect on partners in the distribution channel caused by abandoning trade loading. 
C) the difference in prices caused by trade loading. 
D) comparing the benefits and costs of trade loading with the required investment in inventory.

Question 18

Assume an organization's cost of capital is 8% and Department A currently has a 12% return on investment (ROI).The manager of Department A,who is evaluated on ROI,would MOST likely accept an investment that is expected to return:

Accepted Answer

A) more than 8%. 
B) more than 12%. 
C) more than 8% but less than 12%. 
D) less than 12%. 
A) more than 8%. 
B) more than 12%. 
C) more than 8% but less than 12%. 
D) less than 12%.

Question 19

Conventional segment margin income statements clearly capture the interactive effects among responsibility centers.

Accepted Answer

A) True 
 B)False

Question 20

Return on investment is the ratio of income to investment,with varying definitions of income and investment.

Accepted Answer

A) True 
 B)False

All of the following equations represent return on investment (ROI)EXCEPT:

A measure of operations efficiency generally divides:

Residual income equals reported accounting income less the economic cost of the investment used to generate that income.

Managers of profit centers are responsible for:

A major goal of transfer pricing is to motivate the decision maker to act in the organization's best interests.

In a centralized organization:

The MOST likely result of decentralization is to give local-division managers the responsibility for:

Which of the following statements is FALSE regarding financial and nonfinancial measures of performance?

Caution should be taken when interpreting a segment margin income statement because:

Transfer prices based on actual costs provide no incentive to the supplying division to control costs.

All of the following are reasons that financial control may be an ineffective scorecard EXCEPT that:

Assume the transfer price for a pair of soles is 180% of full costs of the Sole Division and 100,000 of soles are produced and transferred to the Assembly Division.The Sole Division's operating income is:

The MAJOR criticism of using return on investment (ROI)for financial control is that it:

Financial measures identify what is wrong with an organization,not simply provide a signal that something needs attention.

Human resources costs might be allocated to individual cost centers:

The text discusses how Quaker Oats used economic value added to evaluate the practice of trade loading,which is a practice of loading up the supply line with product to last several months.This application of economic value added would focus on:

Assume an organization's cost of capital is 8% and Department A currently has a 12% return on investment (ROI).The manager of Department A,who is evaluated on ROI,would MOST likely accept an investment that is expected to return:

Conventional segment margin income statements clearly capture the interactive effects among responsibility centers.

Return on investment is the ratio of income to investment,with varying definitions of income and investment.

How Management Accounting Information Supports Decision Making

The Balanced Scorecard and Strategy Map

Using Costs in Decision Making

Accumulating and Assigning Costs to Products

Activity-Based Cost Systems

Measuring and Managing Customer Relationships

Measuring and Managing Process Performance

Measuring and Managing Life-Cycle Costs

Behavioral and Organizational Issues in Management Accounting and Control Systems

Using Budgets for Planning and Coordination

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Exam 11: Financial Control

All of the following equations represent return on investment (ROI)EXCEPT:

A measure of operations efficiency generally divides:

Residual income equals reported accounting income less the economic cost of the investment used to generate that income.

Managers of profit centers are responsible for:

A major goal of transfer pricing is to motivate the decision maker to act in the organization's best interests.

In a centralized organization:

The MOST likely result of decentralization is to give local-division managers the responsibility for:

Which of the following statements is FALSE regarding financial and nonfinancial measures of performance?

Caution should be taken when interpreting a segment margin income statement because:

Transfer prices based on actual costs provide no incentive to the supplying division to control costs.

All of the following are reasons that financial control may be an ineffective scorecard EXCEPT that:

Assume the transfer price for a pair of soles is 180% of full costs of the Sole Division and 100,000 of soles are produced and transferred to the Assembly Division.The Sole Division's operating income is:

The MAJOR criticism of using return on investment (ROI)for financial control is that it:

Financial measures identify what is wrong with an organization,not simply provide a signal that something needs attention.

Human resources costs might be allocated to individual cost centers:

The text discusses how Quaker Oats used economic value added to evaluate the practice of trade loading,which is a practice of loading up the supply line with product to last several months.This application of economic value added would focus on:

Assume an organization's cost of capital is 8% and Department A currently has a 12% return on investment (ROI).The manager of Department A,who is evaluated on ROI,would MOST likely accept an investment that is expected to return:

Conventional segment margin income statements clearly capture the interactive effects among responsibility centers.

Return on investment is the ratio of income to investment,with varying definitions of income and investment.

How Management Accounting Information Supports Decision Making

The Balanced Scorecard and Strategy Map

Using Costs in Decision Making

Accumulating and Assigning Costs to Products

Activity-Based Cost Systems

Measuring and Managing Customer Relationships

Measuring and Managing Process Performance

Measuring and Managing Life-Cycle Costs

Behavioral and Organizational Issues in Management Accounting and Control Systems

Using Budgets for Planning and Coordination

Filters