Deck 12: Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Question 1

Which of the following is not an example of a responsibility center?

A)Cost center.
B)Revenue center.
C)Profit center.
D)Investment center.
E)Contribution center.

Answer 1

E

Question 2

A collection of costs to be assigned is called a cost pool.

Answer 2

True

Question 3

The concepts and tools used to measure the performance of people and departments are known as:

A)goal congruence.
B)planning and control.
C)responsibility accounting.
D)delegation of decision making.
E)strategic control.

Answer 3

A

Question 4

The typical balanced scorecard is best described as containing both financial and nonfinancial performance measures.

Question 5

A company-owned restaurant in a fast-food chain is considered an investment center.

Question 6

A cost center manager does not have the ability to produce revenue.

Question 7

An allocation base for a cost pool should ideally be a cost object.

Question 8

A manufacturer's raw-material purchasing department would likely be classified as a:

A)cost center.
B)revenue center.
C)profit center.
D)investment center.
E)contribution center.

Question 9

When managers of subunits throughout an organization strive to achieve the goals set by top management, the result is:

A)goal congruence.
B)planning and control.
C)responsibility accounting.
D)delegation of decision making.
E)strategic control.

Question 10

Each department, responsible for different processes, should have goals different from the company as a whole.

Question 11

Halpern Corporation is in the process of overhauling the performance evaluation system for its San Diego manufacturing division, which produces and sells parts that are popular in the aerospace industry.Which of the following classifications is least ely to be chosen to evaluate the overall operations of the San Diego division?

A)Cost center.
B)Responsibility center.
C)Profit center.
D)Investment center.
E)The profit center and investment center are equally unlikely to be chosen.

Question 12

Performance reports are unique in that they do not incorporate budgets and variance analysis.

Question 13

Responsibility accounting refers to the various concepts and tools used by managers to measure the performance of people and departments in order to foster goal congruence.

Question 14

A lead indicator measures the final outcomes of earlier management decisions.

Question 15

Common costs are charged to a company's operating segments when preparing a segmented income statement.

Question 16

Performance reports help managers use management by exception and effectively control operations.

Question 17

Online businesses assess their ability to keep the customers they have reached using customer acquisition cost (CAC).

Question 18

A cost center manager:

A)does not have the ability to produce revenue.
B)may be involved with the sale of new marketing programs to clients.
C)would normally be held accountable for producing an adequate return on invested capital.
D)often oversees divisional operations.
E)may be the manager who oversees the operations of a retail store.

Question 19

Costs that are traceable to a segment and are completely beyond the influence of the segment manager can be advantageously divided in segment reports into two distinct responsibilities - those for segments and those for segment managers.

Question 20

A company's balanced scorecard should focus on the performance measurements that are most important to its key competitor.

Question 21

Decentralized firms can delegate authority by structuring an organization into responsibility centers.Which of the following organizational segments is most like a totally independent, standalone business where managers are expected to "make it on their own"?

A)Cost center.
B)Revenue center.
C)Profit center.
D)Investment center.
E)Contribution center.

Question 22

Tranquil Beaches owns six hotels in Hawaii, collectively known as the Hawaiian Division.The various hotels, including the Surf & Sun, have operating departments (such as Maintenance, Housekeeping, and Food and Beverage) that are evaluated as either cost centers or profit centers.The Food and Beverage Department, for example, is a profit center, with activities divided into three segments: Banquets and Catering, Restaurants, and Kitchen.If Tranquil Beaches uses a performance-reporting system that is based on responsibility accounting, which of the following disclosures is likely to occur?

A)The detailed operating costs of the Surf & Sun's Kitchen Department will appear on the Hawaiian Division's performance report.
B)The Food and Beverage Department's profit will appear on Kitchen's performance report.
C)The profit of the Surf & Sun hotel will appear on the Hawaiian Division's performance report.
D)The Food and Beverage profit at the Surf & Sun will appear on Tranquil Beaches' performance report.
E)The profit of the Surf & Sun hotel will appear on Food and Beverage's performance report.

Question 23

If the head of a hotel's food and beverage operation is held accountable for revenues and costs, the food and beverage operation would be considered a (n):

A)cost center.
B)revenue center.
C)profit center.
D)investment center.
E)contribution center.

Question 24

A responsibility center in which the manager is held accountable for the profitable use of assets and capital is commonly known as a (n):

A)cost center.
B)revenue center.
C)profit center.
D)investment center.
E)contribution center.

Question 25

Management of Wee Ones (WO), an operator of day-care facilities, wants the company's profit to be subdivided by center.The firm's accountant has provided the following data: WO's advertising, which is handled by the home office, is not reflected in the preceding figures and amounted to $60,000. Assume that management used the allocation base that is most influenced by advertising effort and consistent with sound managerial accounting practices.How much advertising would be allocated to the Irvine center?

A)$17,838.
B)$19,800.
C)$20,000.
D)$20,400.
E)$21,000.

Question 26

The Telemarketing Department of a residential remodeling company would most likely be evaluated as a:

A)cost center.
B)revenue center.
C)profit center.
D)investment center.
E)contribution center.

Question 27

Consider the following statements about performance reports: I.Performance reports provide feedback to managers and allow them to better control operations. II.Many performance reports have budget, actual, and variance data. III.Performance reports are often structured around a firm's organizational hierarchy-that is, data relating to lower-level units (e.g., departments) are combined and flow into higher-level units (e.g., stores). Which of the above statements is (are) true?

A)I only.
B)I and II.
C)I and III.
D)II and III.
E)I, II, and III.

Question 28

The Asian Division of a multinational manufacturing organization would likely be classified as a:

A)cost center.
B)revenue center.
C)profit center.
D)investment center.
E)contribution center.

Question 29

A cost object is:

A)a collection of costs to be assigned.
B)a responsibility center, product, or service to which cost is to be assigned.
C)the tool used to charge cost dollars to user departments.
D)the primary function of a responsibility accounting system.
E)a common cost.

Question 30

Performance reports help managers:

A)use management by exception and effectively control operations.
B)decide whether a cost, profit, or investment center framework is appropriate.
C)design their organizational hierarchy.
D)pinpoint trouble spots.
E)use management by exception and effectively control operations and pinpoint trouble spots.

Question 31

An allocation base for a cost pool should ideally be:

A)machine hours.
B)a cost object.
C)a common cost.
D)a cost driver.
E)direct labor, either cost or hours.

Question 32

Which of the following is an appropriate base to distribute the cost of building depreciation to responsibility centers?

A)Number of employees in the responsibility centers.
B)Budgeted sales dollars of the responsibility centers.
C)Square feet occupied by the responsibility centers.
D)Budgeted net income of the responsibility centers.
E)Total budgeted direct operating costs of the responsibility centers.

Question 33

A cost pool is:

A)a collection of costs to be assigned.
B)almost always the combined result of decisions made by different responsibility center managers.
C)the primary function of a responsibility accounting system.
D)the amount of cost that has been allocated, say, 10%, to a user department.
E)the tool used to allocate cost dollars to user departments.

Question 34

A revenue center manager:

A)does not have the ability to produce revenue.
B)may be involved with the sale of new marketing programs to clients.
C)would normally be held accountable for producing an adequate return on invested capital.
D)often oversees divisional operations.
E)may be the manager who oversees the operations of a retail store.

Question 35

Which of the following would have a low likelihood of being organized as a profit center?

A)A movie theater of a company that operates a chain of theaters.
B)A maintenance department that charges users for its services.
C)The billing department of an Internet Services Provider (ISP).
D)The mayor's office in a large city.
E)Both the billing department of an Internet Services Provider (ISP) and the mayor's office in a large city.

Question 36

A profit center manager:

A)does not have the ability to produce revenue.
B)may be involved with the sale of new marketing programs to clients.
C)would normally be held accountable for producing an adequate return on invested capital.
D)often oversees divisional operations.
E)may be the manager who oversees the operations of a retail store.

Question 37

Which of the following statements is incorrect regarding an investment center?

A)An investment center manager would normally be held accountable for producing an adequate return on invested capital.
B)An investment center manager may be involved with the sale of new marketing programs to clients.
C)An investment center manager does not have the ability to produce revenue.
D)An investment center manager often oversees divisional operations.
E)An investment center may be a large corporation.

Question 38

Management of Wee Ones (WO), an operator of day-care facilities, wants the company's profit to be subdivided by center.The firm's accountant has provided the following data: WO's advertising, which is handled by the home office, is not reflected in the preceding figures and amounted to $60,000. If advertising expense were allocated to centers based on actual center profitability, the amount of advertising expense allocated to the Irvine center would be closest to:

A)$17,820.
B)$19,800.
C)$30,000.
D)$40,543.
E)None of the answers is correct.

Question 39

Compton Corporation, with operations throughout the country, will soon allocate corporate overhead to the firm's various responsibility centers. Which of the following is definitely not a cost object in this situation?

A)The maintenance department.
B)Product no.675.
C)Compton Corporation.
D)The Midwest division.
E)The telemarketing center.

Question 40

Cost pools should be charged to responsibility centers by using:

A)budgeted amounts of allocation bases because the behavior of one responsibility center should influence the allocations to other
B)budgeted amounts of allocation bases because the behavior of one responsibility center should not influence the allocations to
C)actual amounts of allocation bases because the behavior of one responsibility center should influence the allocations to other
D)actual amounts of allocation bases because the behavior of one responsibility center should not influence the allocations to other
E)some other approach.

Question 41

The following information was taken from the segmented income statement of Restin, Inc., and the company's three divisions: In addition, the company incurred common fixed costs of $18,000. Which of the following amounts should be used to evaluate whether Restin, Inc., should continue to invest company resources in the Los Angeles division?

A)$4,000.
B)$8,000.
C)$10,000.
D)$25,000.
E)$90,000.

Question 42

Pride Company is preparing a segmented income statement, subdivided into departments (billing, purchasing, and telemarketing).Which of the following choices correctly describes the accounting treatment of the firm's compensation cost for key executives (president and vice- presidents)?

A)The cost is charged to the departments.
B)The cost is not charged to the departments because, although easily traceable to the departments, it is not controllable at the
C)The cost is not charged to the departments because, although controllable at the departmental level, it is not easily traceable to the
D)The cost is not charged to the departments because it is both easily traceable to the departments and controllable by the
E)The cost is not charged to the departments because it is neither easily traceable to the departments nor controllable by the

Question 43

For a company that uses responsibility accounting, which of the following costs is least ely to appear on a performance report of an assembly-line supervisor?

A)Direct materials used.
B)Departmental supplies.
C)Assembly-line labor.
D)Repairs and maintenance.
E)Assembly-line facilities depreciation.

Question 44

The difference between the profit margin controllable by a segment manager and the segment profit margin is caused by:

A)variable operating expenses.
B)allocated common expenses.
C)fixed expenses controllable by the segment manager.
D)fixed expenses traceable to the segment but controllable by others.
E)sales revenue.

Question 45

Controllable costs, as used in a responsibility accounting system, consist of:

A)only fixed costs.
B)only direct materials and direct labor.
C)those costs that a manager can influence in the time period under review.
D)those costs about which a manager has some knowledge.
E)those costs that are influenced by parties external to the organization.

Question 46

Responsibility accounting systems strive to:

A)place blame on guilty individuals.
B)provide information to managers.
C)hold managers accountable for both controllable and noncontrollable costs.
D)identify unfavorable variances.
E)provide information so that managers can make decisions that are in the best interest of their individual centers rather than in the

Question 47

A segment contribution margin would reflect the impact of:

A)variable operating expenses.
B)fixed expenses controllable by the segment manager.
C)fixed expenses traceable to the segment but controllable by others.
D)common fixed expenses.
E)All answers except common fixed expenses are correct.

Question 48

Thurmon Retail has three stores in West Virginia.Which of the following costs would likely be included when computing the profit margin controllable by store no s manager?

A)Store no s allocated portion of common fixed expenses.
B)Property taxes attributable to store no
C)The salary of Thurmon's president.
D)The income tax expense attributable to store no s profit.
E)Hourly labor costs incurred by personnel at store no

Question 49

Gulf Coast Enterprises (GCE) operates 87 stores and has three divisions: Florida, Georgia, and Alabama.Which of the following costs would not appear on Georgia's portion of GCE's segmented income statement?

A)Costs related to statewide advertising contracts, negotiated by Georgia's divisional manager.
B)Variable sales commissions paid to Georgia's salespeople.
C)Compensation paid to Georgia's chief operating officer, as determined by GCE's management.
D)Georgia's allocated share of general GCE corporate overhead.
E)Compensation paid to Georgia's chief operating officer, as determined by GCE's management and Georgia's allocated share of

Question 50

Distinguishing between controllable and noncontrollable costs on a performance report may result in:

A)an increase in the effectiveness of a cost management system.
B)a decrease in goal congruent behavior by managers.
C)an increase in the quality of performance information.
D)an increase in feelings of blame by managers.
E)an increase in the effectiveness of a cost management system and an increase in the quality of performance information.

Question 51

The following information was taken from the segmented income statement of Restin, Inc., and the company's three divisions: In addition, the company incurred common fixed costs of $18,000. Bay Area's segment profit margin is:

A)$14,000.
B)$18,000.
C)$20,000.
D)$40,000.
E)$115,000.

Question 52

Which of the following would be the best measure on which to base a segment manager's performance evaluation for purposes of granting a bonus?

A)Segment sales revenue.
B)Segment contribution margin.
C)Profit margin controllable by the segment manager.
D)Segment profit margin.
E)Segment net income.

Question 53

Sandy Shores Corporation operates two stores: J and K.The following information relates to J: J's segment contribution margin is:

A)$345,000.
B)$425,000.
C)$620,000.
D)$700,000.
E)$745,000.

Question 54

The following data relate to Department no.3 of Winslett Corporation: On the basis of this information, Department no s variable operating expenses are:

A)$80,000.
B)$160,000.
C)$230,000.
D)$390,000.
E)Not determinable.

Question 55

The following information was taken from the segmented income statement of Restin, Inc., and the company's three divisions: In addition, the company incurred common fixed costs of $18,000. The profit margin controllable by the Central Valley segment manager is:

A)$32,000.
B)$44,000.
C)$50,000.
D)$75,000.
E)$145,000.

Question 56

On a segmented income statement, common fixed expenses will have an effect on a company's:

A)segment contribution margin.
B)profit margin controllable by the segment manager.
C)segment profit margin.
D)segment contribution margin and segment profit margin.
E)net income.

Question 57

The following information was taken from the segmented income statement of Restin, Inc., and the company's three divisions: In addition, the company incurred common fixed costs of $18,000. Assuming use of a responsibility accounting system, which of the following amounts should be used to evaluate the performance of the Los Angeles division manager?

A)$4,000.
B)$8,000.
C)$10,000.
D)$25,000.
E)$90,000.

Question 58

Common costs:

A)are not easily related to a segment's activities.
B)are easily related to a segment's activities.
C)are charged to a company's operating segments when preparing a segmented income statement.
D)are not charged to a company's operating segments when preparing a segmented income statement.
E)are not easily related to a segment's activities and also are not charged to a company's operating segments when preparing a

Question 59

The profit margin controllable by the segment manager would not include:

A)variable operating expenses.
B)fixed expenses controllable by the segment manager.
C)a share of the company's common fixed expenses.
D)income tax expense.
E)a share of the company's common fixed expenses and income tax expense.

Question 60

The following data relate to Department no.2 of Velma Corporation: On the basis of this information, fixed costs traceable to Department no.2 but controllable by others are:

A)$160,000.
B)$220,000.
C)$260,000.
D)$480,000.
E)Not determinable.

Question 61

Midtown Retail operates a retail store in Kansas City, MO., and S ouis, MO.The following information relates to the Kansas City facility: · The store sold 65,000 units at $18.00 each, after having purchased the units from various suppliers for $12.50.Kansas City salespeople are paid a 5% commission based on gross sales dollars. · Kansas City's sales manager oversees the placement of local advertising contracts, which totaled $54,000 for the year.Local property taxes amounted to $14,500. · The sales manager's $65,000 salary is set by Kansas City's store manager.In contrast, the store manager's $134,000 salary is determined by Midtown's vice president. · Kansas City incurred $6,800 of other noncontrollable costs. · Nontraceable (common) corporate overhead totaled $68,000. Midtown's corporate headquarters is located in S ouis, and the company uses responsibility accounting to evaluate performance. Required: Prepare a segmented income statement for the Kansas City store, being sure to disclose the segment contribution margin, the segment controllable profit margin, and segment profit margin.

Question 62

Which of the following balanced-scorecard perspectives is influenced by a company's vision and strategy?

A)Financial.
B)Customer.
C)Internal business process.
D)Learning and growth.
E)All of the answers are correct.

Question 63

Cloud Services uses a balanced scorecard to report to its investors at the end of each quarter.During the 3rd and 4th quarter, the company had the following results: What was Cloud's customer acquisition cost at the end of the 4th quarter?

A)$33.34.
B)$42..
C)$20..
D)$24..
E)$8.67.

Question 64

Which of the following would not be considered a proper financial perspective measure?

A)Percentage of profit growth.
B)Percentage of revenue growth.
C)Increased percentage of return on assets.
D)Percentage of automated transactions.
E)Increased percentage of segment contribution margins.

Question 65

Stargazer Services Co.is organized in three segments: Sky Mountain, Diamond View, and Star Party.Data for the company and for these segments follow: What are Sky Mountain's variable costs and noncontrollable fixed costs?

A)Variable costs = $240; noncontrollable fixed costs = $92.
B)Variable costs = $80; noncontrollable fixed costs = $228.
C)Variable costs = $240; noncontrollable fixed costs = $228.
D)Variable costs = $80; noncontrollable fixed costs = $92.
E)Cannot be determined.

Question 66

Cloud Services uses a balanced scorecard to report to its investors at the end of each quarter.During the 3rd and 4th quarter, the company had the following results: What was Cloud's cash runway at the end of the 4th quarter?

A)8.2 months.
B)55 months.
C)49 months.
D)27.5 months.
E)24.5 months.

Question 67

Cloud Services uses a balanced scorecard to report to its investors at the end of each quarter.During the 3rd and 4th quarter, the company had the following results: What was Cloud's cash burn rate at the end of the 4th quarter?

A)$3,900,000.
B)$45,000.
C)$225,000.
D)$450,000.
E)$1,350,000.

Question 68

The allocation of costs gives rise to several unique terms.Briefly discuss the following: cost object, cost allocation base, and cost allocation.

Question 69

Cloud Services uses a balanced scorecard to report to its investors at the end of each quarter.During the 3rd and 4th quarter, the company had the following results: What was Cloud's churn rate at the end of the 4th quarter?

A)20%.
B)Cannot be computed based on the information provided.
C)25%.
D)49%.
E)33%.

Question 70

The following information was taken from the segmented income statement of Restin, Inc., and the company's three divisions: In addition, the company incurred common fixed costs of $18,000. Assume that the Los Angeles division increases its promotion expense, a controllable fixed cost, by $10,000.As a result, revenues increased by $50,000.If variable expenses are tied directly to revenues, the new Los Angeles segment profit margin is:

A)$12,500.
B)$22,500.
C)$32,500.
D)$50,000.
E)$60,000.

Question 71

An increasingly popular approach that integrates financial and customer performance measures with measures in the areas of internal operations, learning, and growth is known as:

A)the integrated performance measurement tool (IPMT).
B)the balanced scorecard.
C)gain sharing.
D)cycle efficiency.
E)overall quality assessment (OQA).

Question 72

The typical balanced scorecard is best described as containing:

A)financial performance measures.
B)nonfinancial performance measures.
C)neither financial nor nonfinancial performance measures.
D)both financial and nonfinancial performance measures.
E)either financial or nonfinancial performance measures but not both.

Question 73

Norwegian Resort Tours (NRT), which operates in a very competitive marketplace, is considering four categories of performance measures: (1) profitability measures, (2) customer-satisfaction measures, (3) efficiency and quality measures, and (4) learning and growth measures.The company assigns one manager to each resort to oversee the resort's general operations.If NRT desired to adopt a balanced-scorecard approach, which measures should the firm use in the evaluation of its managers?

A)1.
B)1, 2.
C)2, 3.
D)1, 2, 4.
E)1, 2, 3, 4.

Question 74

Stargazer Services Co.is organized in three segments: Sky Mountain, Diamond View, and Star Party.Data for the company and for these segments follow What are Diamond View's controllable profit margin and segment profit margin?

A)Controllable profit margin = $208; segment profit margin = $128.
B)Controllable profit margin = $132; segment profit margin = $52.
C)Controllable profit margin = $132; segment profit margin = $128.
D)Controllable profit margin = $208; segment profit margin = $52.
E)Cannot be determined.

Question 75

Lead indicators guide management to:

A)take actions now that will have positive effects on organizational performance now.
B)take actions now that will have positive effects on organizational performance in the future.
C)take actions in the future that will have positive effects on organizational performance now.
D)take actions in the past that will have positive effects on organizational performance in the future.
E)pursue identical strategies as those implemented with lag indicators.

Question 76

When using a balanced scorecard, which of the following is typically classified as an internal business process performance measure?

A)Cash flow.
B)Number of customer complaints.
C)Employee training hours.
D)Number of employee suggestions.
E)Number of suppliers used.

Question 77

The performance reports generated by a responsibility accounting system often form a "hierarchy of performance reports." Explain what is meant by this term.

Question 78

When using a balanced scorecard, a company's market share is typically classified as an element of the firm's:

A)financial performance measures.
B)customer performance measures.
C)learning and growth performance measures.
D)internal-operations performance measures.
E)interdisciplinary performance measures.

Question 79

Cloud Services uses a balanced scorecard to report to its investors at the end of each quarter.During the 3rd and 4th quarter, the company had the following results: What was Cloud's market share at the end of the 4th quarter?

A)17%.
B)20%.
C)3%.
D)6%.
E)4%.

Question 80

Stargazer Services Co.is organized in three segments: Sky Mountain, Diamond View, and Star Party.Data for the company and for these segments follow: What are Star Party's segment contribution margin and noncontrollable fixed costs?

A)Segment contribution margin = $120; noncontrollable fixed costs = $84.
B)Segment contribution margin = $144; noncontrollable fixed costs = $36.
C)Segment contribution margin = $144; noncontrollable fixed costs = $84.
D)Segment contribution margin = $120; noncontrollable fixed costs = $36.
E)Cannot be determined.