Deck 13: Management Control Systems, the Balanced Scorecard, and Responsibility Accounting

Question 1

Which of the following would NOT be a step in the design of a successful management control system?

A) Specify organizational goals, subgoals and objectives.
B) Identify responsibility centres.
C) Measure and report financial performance but not nonfinancial performance.
D) Develop measures of performance for motivation and goal congruence.

Answer 1

C

Question 2

The management control system is distinguished from a financial accounting system by its focus on all of the following EXCEPT

A) generally accepted accounting principles.
B) organizational goals and objectives.
C) internal management decision making.
D) motivation and evaluation of performance consistent with the organization's goals.

Answer 2

A

Question 3

Once a management control system is designed for an organization, it will meet the organization's goals indefinitely.

Answer 3

False

Question 4

Segments are responsibility centres for which a separate measure of revenues and costs is obtained.

Question 5

A management control system is a logical integration of management accounting tools to gather and report data and to evaluate performance.

Question 6

Which of the following is NOT a characteristic of a management control system?

A) It aids and coordinates the process of making decisions.
B) It encourages short-term profitability.
C) It motivates individuals throughout the organization to act in concert.
D) It coordinates forecasting sales and cost-driver activities, budgeting, and measuring and evaluating performance.

Question 7

Productivity is a measure of inputs divided by outputs.

Question 8

Controllable costs should be ignored in evaluating the responsibility centre manager's performance.

Question 9

A logical integration of management accounting tools to gather and report data and to evaluate performance is a(n)

A) internal control system.
B) quality control system.
C) financial reporting system.
D) management control system.

Question 10

A responsibility centre for controlling revenues as well as costs is called a profit centre.

Question 11

Total quality management focuses on prevention of defects and on customer satisfaction.

Question 12

To achieve goal congruence and managerial effort, designers of management control systems should focus on motivating employees.

Question 13

Information to support the management control system often comes primarily from the organization's

A) internal control system.
B) top management.
C) stockholders.
D) financial accounting system.

Question 14

Explicit coordination of individuals' activities, actions and choices is the hallmark of the

A) management control system.
B) responsibility centre.
C) internal control system.
D) quality-control chart.

Question 15

Control systems in nonprofit organizations will never be as highly developed as in profit-seeking firms because measurements are more difficult.

Question 16

A management control system must evolve with changing times, or the organization risks not being able to manage its resources effectively or efficiently.

Question 17

It is common in Canadian companies to ensure that an internal control system is in place to prevent errors and irregularities and promote operating efficiency.

Question 18

A well-designed management control system ignores nonfinancial objectives and focuses on financial objectives to develop and report measures of performance.

Question 19

Goal congruence exists when individuals aim at short-term goals and groups aim at long-term organizational goals.

Question 20

An investment centre's success is measured only by its income.

Question 21

Exertion toward a goal or objective, including all conscious actions that result in more efficiency and effectiveness, is referred to as

A) goal congruence.
B) motivation.
C) responsibility accounting.
D) managerial effort.

Question 22

All of the following are financial objectives of responsibility centres EXCEPT

A) operations budgets.
B) profit targets.
C) customer satisfaction.
D) return on investment.

Question 23

The drive for some selected goal that creates effort and action toward that goal is called

A) motivation.
B) goal congruence.
C) managerial effort.
D) apathy.

Question 24

Which of the following is NOT a synonym for an organization's subgoals?

A) Critical success factors
B) Critical variables
C) Key result areas
D) Profit centres

Question 25

A responsibility centre whose success is measured NOT only by its income, but also by relating that income to its invested capital is called a(n)

A) profit centre.
B) cost centre.
C) investment centre.
D) accounting centre.

Question 26

The first step in designing a management control system is

A) evaluating management's performance.
B) establishing organizational goals.
C) preparing financial statements.
D) distinguishing between profit centres and cost centres.

Question 27

Profit centres

A) have responsibility for controlling costs as well as revenues.
B) control and report costs only.
C) measure income and relate that income to their invested capital.
D) are the same as investment centres.

Question 28

Which of the following statements regarding responsibility centres is false?

A) Responsibility centres usually have one objective.
B) Management control systems monitor responsibility centre objectives.
C) Responsibility centres are usually classified according to their financial responsibility.
D) Cost centres, profit centres and investments centres are all examples of responsibility centres.

Question 29

An internal control system consists of all of the following EXCEPT

A) methods to prevent errors and irregularities.
B) procedures to promote goal congruence.
C) methods to promote operating efficiency.
D) procedures to detect errors and irregularities.

Question 30

To create a management control system that meets the organization's needs, designers need to consider all of the following EXCEPT

A) existing constraints.
B) external reporting requirements.
C) internal controls.
D) costs versus benefits.

Question 31

An effective management control system gives each lower-level manager responsibility for a group of activities and objectives and then reports on all of the following EXCEPT

A) the results of activities.
B) the manager's influence on those results.
C) effects of uncontrollable events.
D) effects of controllable events.

Question 32

To achieve maximum benefits at minimum cost, a management control system must

A) look at the short term only.
B) motivate managers with quarterly bonuses based on performance.
C) foster goal congruence and managerial effort.
D) be the same as the financial accounting system.

Question 33

Specific tangible achievements that can be observed on a short-term basis are called

A) principles.
B) guidelines.
C) objectives.
D) assumptions.

Question 34

Goal congruence exists when

A) managers are looking only at the short run.
B) individuals and groups aim at the same organizational goals.
C) employees make decisions in their own best interest without regard to company goals.
D) employees are stockholders.

Question 35

All of the following are nonfinancial objectives of responsibility centres EXCEPT

A) quality.
B) productivity.
C) operations budgets.
D) customer satisfaction.

Question 36

Good performance measures will do all of the following EXCEPT

A) be subjective.
B) relate to the goals of the organization.
C) balance long-term and short-term concerns.
D) reflect the management of key activities.

Question 37

A set of activities assigned to a manager or a group of managers or other employees is called a(n)

A) internal control system.
B) management control system.
C) responsibility centre.
D) total quality control system.

Question 38

The process of identifying what parts of the organization have primary responsibility for each objective, developing measures of achievement and objectives, and creating reports of these measures by organization subunit or responsibility centre is known as

A) financial accounting.
B) management accounting.
C) total quality accounting.
D) responsibility accounting.

Question 39

A responsibility centre for which costs are accumulated is called a(n)

A) profit centre.
B) cost centre.
C) investment centre.
D) accounting centre.

Question 40

Who is responsible for developing, maintaining and evaluating internal control systems?

A) Managers
B) Stockholders
C) Accountants
D) Both managers and accountants

Question 41

The effort to insure that products and services perform to customer requirements is called

A) productivity.
B) cycle time.
C) quality control.
D) managerial effort.

Question 42

Any cost that cannot be affected by the management of a responsibility centre within a given time span is a(n)

A) controllable cost.
B) quality cost.
C) uncontrollable cost.
D) opportunity cost.

Question 43

The following information pertains to the Southern Territory of Nordeen Company:

The contribution margin is

A) $37,500.
B) $82,500.
C) $67,500.
D) $25,000.

Question 44

The statistical plot of measures of various product dimensions or attributes is called a

A) quality-control chart.
B) productivity chart.
C) cycle-time chart.
D) conventional chart.

Question 45

A report that displays the financial impact of quality is called a

A) cycle time report.
B) productivity report.
C) financial report.
D) quality cost report.

Question 46

A controllable cost

A) should be ignored in evaluating the responsibility centre manager's performance.
B) is a cost that is influenced by a manager's decisions and actions.
C) is a cost that cannot be affected by the management of a responsibility centre within a given time span.
D) is the same as a sunk cost.

Question 47

Managers on all levels are asked to explain the total segment contribution but are held responsible only for the

A) controllable contribution.
B) fixed costs.
C) variable costs.
D) unallocated costs.

Question 48

A management control system can be designed to stress all of the following simultaneously EXCEPT

A) cost behaviour.
B) customer satisfaction.
C) controllability.
D) manager performance.

Question 49

All of the following are categories of quality costs EXCEPT

A) development.
B) prevention.
C) appraisal.
D) internal failure.

Question 50

Quality control is a concern of

A) privately owned companies.
B) nonprofit organizations.
C) government organizations.
D) privately owned companies, nonprofit and government organizations alike.

Question 51

Total quality management

A) is the application of quality principles in the quality control department.
B) involves keeping the responsibility for quality control with the management.
C) has significant implications for organization goals, structure and management control systems.
D) is used by all U.S. companies.

Question 52

The following information pertains to the Southern Territory of Nordeen Company:

The contribution controllable by segment manager is

A) $67,500.
B) $37,500.
C) $25,000.
D) $17,500.

Question 53

The following information pertains to the Northwest Territory of Jordan, Inc.:

The contribution margin is

A) $150,000.
B) $330,000.
C) $270,000.
D) $100,000.

Question 54

Internal failure costs include

A) field repairs.
B) rework.
C) returns.
D) warranty expenses.

Question 55

Uncontrollable costs

A) are influenced by a manager's decisions and actions.
B) provide evidence about a manager's performance.
C) are also referred to as opportunity costs.
D) should be ignored in evaluating the responsibility centre manager's performance.

Question 56

The following information pertains to the Northwest Territory of Jordan, Inc.:

The contribution by segment is

A) $100,000.
B) $150,000.
C) $ 70,000.
D) $270,000.

Question 57

The following information pertains to the Northwest Territory of Jordan, Inc.:

The contribution controllable by segment manager is

A) $270,000.
B) $150,000.
C) $100,000.
D) $ 70,000.

Question 58

The contribution margin

A) is especially helpful for predicting the impact on income of short-run changes in activity volume.
B) is defined as sales revenues less all fixed costs.
C) cannot be used with segments.
D) cannot be calculated for investment centres.

Question 59

A responsibility centre for which a separate measure of revenues and/or costs is obtained is called a(n)

A) accounting centre.
B) segment.
C) contribution centre.
D) quality control centre.

Question 60

The following information pertains to the Southern Territory of Nordeen Company:

The contribution by segment is

A) $25,000.
B) $37,500.
C) $17,500.
D) $67,500.

Question 61

Which of the following statements regarding management control principles is false?

A) Always expect that individuals will be pulled in the direction of their own self-interest.
B) Design incentives so that individuals who pursue their own self-interest are also achieving the organization's objectives.
C) Evaluate actual performance based on expected or planned performance.
D) Consider financial performance over nonfinancial performance.

Question 62

Conway Corporation and Philips Company are computer companies. Comparative data for 20X1 and 20X3 are given below.
Assume that each 20X1 dollar is equivalent to 1.45 of the 20X3 dollars, due to inflation.
What is Conway's 20X3 productivity measure in terms of revenues per employee?

A) $1,015.00
B) $700.00
C) $714.29
D) $870.00

Question 63

A responsibility centre for controlling revenues as well as costs.

Question 64

Conway Corporation and Philips Company are computer companies. Comparative data for 20X1 and 20X3 are given below.
Assume that each 20X1 dollar is equivalent to 1.45 of the 20X3 dollars, due to inflation.
What is Philips' 20X3 productivity measure in terms of revenues per employee?

A) $892.31
B) $615.39
C) $790.91
D) $545.45

Question 65

Conway Corporation and Philips Company are computer companies. Comparative data for 20X1 and 20X3 are given below.
Assume that each 20X1 dollar is equivalent to 1.45 of the 20X3 dollars, due to inflation.
What is Conway's 20X1 revenues per employee in term of 20X3 dollars?

A) $1,015.00.
B) $700.00.
C) $714.29.
D) $870.00.

Question 66

Decreasing cycle time

A) requires a low quality product or service.
B) creates reduced flexibility and slower reactions to customer needs.
C) requires smooth-running processes.
D) results in bringing products or services less quickly to customers.

Question 67

Nagel Corporation and Connors Company are computer companies. Comparative data for 20X1 and 20X5 are given below.
Assume that each 20X1 dollar is equivalent to 1.60 of the 20X5 dollars, due to inflation.
What is Connors' 20X5 productivity measure in terms of revenues per employee?

A) $1,476.93
B) $1,230.77
C) $1,969.23
D) $1,090.91

Question 68

A logical integration of management accounting tools to gather and report data and to evaluate performance.

Question 69

Exists when individuals and groups aim at the same organizational goals.

Question 70

Exertion toward a goal or objective, including all conscious actions that result in more efficiency and effectiveness.

Question 71

A responsibility centre for which costs are accumulated.

Question 72

Control systems in nonprofit organizations probably will never be as highly developed as in profit-seeking firms because in nonprofit organizations

A) there is more competitive pressure from other organizations to improve management control systems.
B) the role of budgeting is often more a matter of playing bargaining games with sources of funding to get the largest possible authorization than it is rigorous planning.
C) organizational goals and objectives are more clear.
D) measurements are less difficult to make.

Question 73

A set of activities assigned to a manager or a group of managers or other employees.

Question 74

Conway Corporation and Philips Company are computer companies. Comparative data for 20X1 and 20X3 are given below.
Assume that each 20X1 dollar is equivalent to 1.45 of the 20X3 dollars, due to inflation.
What is Philips' revenues per employee in terms of 20X3 dollars?

A) $892.31
B) $615.39
C) $790.91
D) $545.45

Question 75

A responsibility centre whose success is measured not only by its income, but also by relating that income to its invested capital, as in a ratio of income to the value of the capital employed.

Question 76

Nagel Corporation and Connors Company are computer companies. Comparative data for 20X1 and 20X5 are given below.
Assume that each 20X1 dollar is equivalent to 1.60 of the 20X5 dollars, due to inflation.
What is Nagel's 20X5 productivity measure in terms of revenues per employee?

A) $2,240.00
B) $1,400.00
C) $1,428.57
D) $1,200.00

Question 77

Which of the following statements is false?

A) Productivity is a measure of outputs divided by inputs.
B) The fewer inputs needed to produce a given output, the more productive the organization.
C) Inputs and outputs are difficult to measure.
D) In a productivity ratio, the numerator is a measure of the resource that management wishes to control.

Question 78

Nagel Corporation and Connors Company are computer companies. Comparative data for 20X1 and 20X5 are given below.
Assume that each 20X1 dollar is equivalent to 1.60 of the 20X5 dollars, due to inflation.
What is Nagel's 20X1 revenues per employee in terms of 20X5 dollars?

A) $2,240.00
B) $1,400.00
C) $1,428.57
D) $1,200.00

Question 79

The process of identifying what parts of the organization have primary responsibility for each objective, developing measures of achievement and objectives, and creating reports of these measures by organization subunit or responsibility centre.

Question 80

The time taken to complete a product or service or any of the components of a product or service is called the

A) accounting cycle.
B) cycle time.
C) operating cycle.
D) productive time.