Exam 18: Strategic Performance Measurement: Cost Centers, Profit Centers, and the Balanced Scorecard

A value stream income statement is best associated with:

The sales life cycle has three phases: early, growth, and maturity. The appropriate performance measures for the growth phase include:

Operating income reported under full costing will exceed operating income reported under variable costing for a given period if:

The least common type of SBU in a retail firm is the:

For production and support departments, a method of implementing cost centers that is output-oriented is the:

Performance evaluation in most firms is applied at:

Treble Inc. planned and manufactured 250,000 units of its single product in 2019, its first year of operations. Variable manufacturing costs were $30 per unit of production. Planned and actual fixed manufacturing costs were $600,000. Marketing and administrative costs (all fixed) were $300,000 in 2019. Treble Inc. sold 200,000 units of product in 2019 at $60 per unit. Sales for 2019 are calculated to be:

Bradbo owned two adjoining restaurants, the Pork Palace and the Chicken Hut. Each restaurant was treated as a profit center for performance evaluation purposes. Although the restaurants had separate kitchens, they shared a central baking facility. The principal costs of the baking area included materials, supplies, labor, and depreciation and maintenance on the equipment. Bradbo allocated the monthly costs of the baking facility to the two restaurants based on the number of tables served in each restaurant during the month using dual allocation and equal sharing of fixed costs. In April, the costs were $30,000, of which $16,000 were fixed. The Pork Palace served 4,400 tables, while the Chicken Hut served 3,600 tables. The amount of joint cost that should have been allocated to the Pork Palace in April is calculated to be:

Sand and Sea Resorts owns and operates two resorts in a coastal town. Both resorts are located on a barrier island that is connected to the mainland by a high bridge. One resort is located on the beach and is called the Crystal Coast Resort. The other resort is located on the inland waterway which passes between the town and the mainland; it is called the Harborview Resort. Some key information about the two resorts for the current year is shown below. Harborview Crystal Coast Total Revenue (000) \ 3,500 \ 6,500 \ 10,000 Square feet 75,000 225,000 300,000 Rooms 60 140 200 Assets (000) \ 100,000 \ 400,000 \ 500,000 The nontraceable operating costs of the resort amount to $\$ 4,000,000$ . By careful study, the management accountant at Sand and Sea has determined that, while the costs are not directly traceable, the total of $\$ 4$ million could be fairly allocated to the four cost drivers as follows. Cost Driver Amount Allocated Revenue \ 200,000 Square feet 100,000 Rooms 600,000 Assets (000) 3,100,000 Using the information regarding the allocation of the $4 million to the four cost drivers, determine the operating profit of the Crystal Coast Resort.

Red Apple Industries manufactures institutional-use furniture. Dept. A is responsible for welding the base of the desk to the chair assembly. The desks are then placed on an automatic conveyer to Dept. B, where the desktop is riveted to the chair. The desks continue on the conveyer to Dept. C for further assembly. Wanda, the manager of Dept. A, is responsible for moving 800 welded desks per hour to Dept. B. A faulty circuit in Dept. B causes a delay in processing in the department and prompts Rosie, the Dept. B manager, to ask Wanda to stop the conveyer. Wanda refuses, necessitating the removal of the welded desks from the conveyer until the riveting can resume. Rosie bills Wanda's department for the costs of this extra work. Wanda disputes the charge, citing her responsibility to convey 800 desks/hour to Dept. B. Required: How should the managers' dispute be resolved? How could it have been avoided?

Writer One Inc. manufactures ball point pens that sell at wholesale for $0.80 per unit. Budgeted production in both 2018 and 2019 was 8,000 units. There was no beginning inventory in 2018. The following data summarized the 2018 and 2019 operations: 2018 2019 Units sold 6,500 9,000 Units produced 8,000 8,000 Costs: Variable factory overhead per unit \ 0.20 \ 0.20 Fixed factory overhead \ 1,200 \ 1,200 Variable marketing per unit \ 0.30 \ 0.30 Fixed Selling and Administrative \ 320 \ 320 Full costing operating income for 2018 is calculated to be:

Sand and Sea Resorts owns and operates two resorts in a coastal town. Both resorts are located on a barrier island that is connected to the mainland by a high bridge. One resort is located on the beach and is called the Crystal Coast Resort. The other resort is located on the inland waterway which passes between the town and the mainland; it is called the Harborview Resort. Some key information about the two resorts for the current year is shown below. Harborview Crystal Coast Total Revenue (000) \ 3,500 \ 6,500 \ 10,000 Square feet 75,000 225,000 300,000 Rooms 60 140 200 Assets (000) \ 100,000 \ 400,000 \ 500,000 The nontraceable operating costs of the resort amount to $\$ 4,000,000$ . By careful study, the management accountant at Sand and Sea has determined that, while the costs are not directly traceable, the total of $\$ 4$ million could be fairly allocated to the four cost drivers as follows. Cost Driver Amount Allocated Revenue \ 200,000 Square feet 100,000 Rooms 600,000 Assets (000) 3,100,000 What is the operating profit of the Crystal Coast Resort, using revenue as an allocation base?

The value stream income statement provides the following information not usually contained in the contribution income statement:

If a manager's evaluation is performed before the manager's efforts and decisions have been made, then the evaluation is performed:

The manager acting independently in such a way as to simultaneously achieve top management's objectives is exhibiting:

Operational control has a management-by-exception approach in contrast to management control, which is more consistent with:

Tough-Built Corporation produces specialized truck body components, specializing in hydraulic lifts for dump trucks. Founded 35 years ago by George Halloway, the firm now employs 150 workers and has annual sales of over $10 million. George operates the firm in a highly centralized way, and retains control over all changes in operations. He is a regular visitor to the production area, which helps him "keep his finger on the pulse of the firm." Although George Halloway is now 67 years old, he has no apparent management successor, and has always hand-picked his department heads and staff personnel. He has been generous to those who worked for him, paying substantial bonuses each year to the employees based on his personal evaluation of each worker. Just six weeks ago, a heart attack convinced George to consider retirement, and he decided to sell the firm to his employees. You are assigned the task of recommending a set of strategic performance measures for the firm, assuming that the new worker management wants to operate as a decentralized firm. Required: What major management problems do you foresee in the transition from sole owner to employee ownership?

Operating income reported under full costing will exceed operating income reported under variable costing for a given period if:

Writer One Inc. manufactures ball point pens that sell at wholesale for $0.80 per unit. Budgeted production in both 2018 and 2019 was 8,000 units. There was no beginning inventory in 2018. The following data summarized the 2018 and 2019 operations: 2018 2019 Units sold 6,500 9,000 Units produced 8,000 8,000 Costs: Variable factory overhead per unit \ 0.20 \ 0.20 Fixed factory overhead \ 1,200 \ 1,200 Variable marketing per unit \ 0.30 \ 0.30 Fixed Selling and Administrative \ 320 \ 320 Variable costing operating income for 2018 is calculated to be:

Under variable costing, fixed manufacturing overhead costs would be classified as: