Deck 25: Performance Management and Evaluation

Question 1

What is being measured by managers is the same as the actual measures used to monitor performance.

Answer 1

False

Question 2

Performance measurement is the use of both quantitative and qualitative tools to gauge an organization's performance in relation to a specific goal or an expected outcome.

Answer 2

False

Question 3

Managers at all levels are evaluated in terms of their ability to manage their areas of responsibility in keeping with organizational goals.

Answer 3

True

Question 4

Both flexible budgeting and variable costing can be utilized to evaluate cost center performance.

Question 5

Most organizations use very similar performance measures in their day-to-day business operations.

Question 6

To succeed, an organization must add value for all of its stakeholders in the long term only.

Question 7

A responsibility center whose manager is held accountable for both revenues and costs and for the resulting operating income is called a profit center.

Question 8

Responsibility accounting is more concerned with performance evaluation than performance management.

Question 9

When developing performance measures, management must consider a number of different issues besides what to measure and how to measure.

Question 10

A performance management and evaluation system allows a company to identify how well it is doing, where it is going, and what improvements will make it more profitable.

Question 11

If a performance report contains items that are out of a manager's control, the entire responsibility accounting system can be called into question.

Question 12

An organization's four basic stakeholder groups include investors, employees, external business processes, and customers.

Question 13

The alignment of an organization's strategy with all the perspectives of the balanced scorecard results in performance objectives that benefit all stakeholders.

Question 14

A report for a responsibility center includes costs and revenues that are both controllable and uncontrollable by a manager.

Question 15

It is not necessary for managers to fully understand the causal relationship between their actions and the organization's overall performance to get results.

Question 16

A performance management and evaluation system is mainly utilized to account for and report on financial performance.

Question 17

Performance reports allow comparisons between actual performance and budget expectations.

Question 18

The balanced scorecard links the perspectives of an organization's stakeholders with the organization's mission and vision, performance measures, strategic plan, and resources.

Question 19

Manufacturing companies rarely utilize responsibility accounting.

Question 20

An organization chart assists in management control.

Question 21

When calculating ROI, assets invested represent the average of the beginning and ending asset balances for a given period.

Question 22

A variable costing income statement is essentially the same as a traditional income statement.

Question 23

Like ROI, residual income is a performance measure displayed as a ratio.

Question 24

The economic value added performance measure focuses on long-term financial performance.

Question 25

Economic value added is synonymous with shareholder wealth created by an investment center.

Question 26

A flexible budget is derived by multiplying actual unit output by the standard unit costs.

Question 27

Incentive awards are utilized mainly to encourage long-term performance.

Question 28

Residual income is the amount of profit left after subtracting expenses of a particular investment center.

Question 29

ROI is a performance measure mainly connected with a company's income statement.

Question 30

The equation for economic value added includes pretax operating income as well as current liabilities.

Question 31

The logical linking of goals to measurable objectives and targets and the tying of appropriate compensation incentives to the achievement of such objectives and targets are critical to the successful coordination of goals.

Question 32

In evaluating investment center performance, ROI proves to be such a comprehensive performance measure that other performance measures are rarely needed.

Question 33

A manager can improve the economic value of an investment center by decreasing assets.

Question 34

For residual income figures to be comparable on a companywide basis, all investment centers must have equal access to resources and similar asset investment bases.

Question 35

Employer-provided health insurance is a common type of incentive compensation.

Question 36

How effective a performance management and evaluation system is depends on how well the goals of the entire company are coordinated rather than on how well the goals of individual responsibility centers and managers are coordinated.

Question 37

ROI, residual income, and economic value added all represent performance measures that can be utilized to determine investment center performance.

Question 38

Tying compensation incentives to performance targets decreases the likelihood that the goals of responsibility centers, managers, and the entire organization will be well coordinated.

Question 39

Variable costing is a method of reporting that deals only with a manager's controllable, variable costs.

Question 40

Cost of capital is the maximum desired rate of return on a particular investment.

Question 41

By balancing all stakeholders' needs, managers are more likely to achieve their objectives in

A) the long term.
B) the short term.
C) the short term as well as the long term.
D) all areas of the organization.

Question 42

One of the overall goals of the Pancake House Restaurant is customer satisfaction. In the light of that goal, match the internal business processes perspective with the appropriate objective.

A) Customer satisfaction means that the chefs engage in culinary continuing education.
B) Customer satisfaction means that customers receive their food within 10 minutes of placing an order.
C) Customer satisfaction means that the customer appreciation program is successful.
D) Customer satisfaction means that the restaurant is profitable.

Question 43

Many organizations utilize responsibility accounting

A) to assist in building performance measures for the organization.
B) to assist in performance management and evaluation.
C) solely to evaluate how well employees are handling their responsibilities.
D) as an alternative to generally accepted accounting principles.

Question 44

The use of quantitative tools to gauge an organization's performance in relation to a specific goal or an expected outcome is known as

A) responsibility accounting.
B) an asset turnover.
C) a performance management and evaluation system.
D) a performance measurement.

Question 45

Which of the following represents a basic stakeholder of an organization?

A) The account receivable clerk of the organization
B) A vice president of the organization
C) A line supervisor of the organization
D) All of these choices

Question 46

The manager of Center A is responsible for generating cash inflows and incurring costs with the goal of making money for the company. The manager has no responsibility for assets. What type of responsibility center is Center A?

A) Cost center
B) Discretionary cost center
C) Profit center
D) Revenue center

Question 47

One of the overall goals of the Pancake House Restaurant is customer satisfaction. In the light of that goal, match the learning and growth perspective with the appropriate objective.

A) Customer satisfaction means that the chefs engage in culinary continuing education.
B) Customer satisfaction means that customers receive their food within 10 minutes of placing an order.
C) Customer satisfaction means that the customer appreciation program is successful.
D) Customer satisfaction means that the restaurant is profitable.

Question 48

The balanced scorecard was developed by

A) Robert S. Kaplan.
B) David R. Norton.
C) David R. Norton and Robert S. Princeton.
D) Robert S. Kaplan and David R. Norton.

Question 49

The manager of Center D designs, produces, and sells products to external parties. The manager makes both long-term and short-term decisions. What type of responsibility center is Center D?

A) Cost center
B) Profit center
C) Revenue center
D) Investment center

Question 50

In developing performance measures, management must consider which of the following?

A) How should we measure?
B) How can managers monitor financial performance?
C) What should we measure?
D) All of these choices

Question 51

The balanced scorecard links the perspectives of an organization's stakeholders with the organization's

A) goals and vision, performance goals, strategic plan, and financial resources.
B) mission and overall plan, performance measures, departmental plans, and resources.
C) mission and vision, performance measures, strategic plan, and resources.
D) mission and vision, performance goals, overall plan, and resources.

Question 52

The causal links between an organization's goals, objectives, measures, performance targets need not be apparent.

Question 53

Which of the following is an example of a performance measurement?

A) Product quality
B) Number of customer complaints
C) Customer satisfaction
D) All of these choices

Question 54

How many different types of responsibility centers exist?

A) 2
B) 5
C) 10
D) 3

Question 55

A performance management and evaluation system is utilized so that a company can identify which of the following?

A) How well it is doing and where it is going
B) How satisfied investors are with their return on investment
C) How satisfied both customers and employees are
D) How well it is doing, where it is going, and what improvements will bring in more profit

Question 56

The manager of Center B produces a product that is not sold to an external party. What type of responsibility center is Center B?

A) Cost center
B) Discretionary cost center
C) Profit center
D) Revenue center

Question 57

The way in which the performance of a cost center is evaluated is similar to

A) job order costing.
B) standard costing.
C) process costing.
D) none of these choices.

Question 58

The manager of Center C is responsible for the online order operations of a large retailer. What type of responsibility center is Center C?

A) Discretionary cost center
B) Profit center
C) Revenue center
D) Investment center

Question 59

A performance management and evaluation system is a set of procedures that account for and report on

A) qualitative performance.
B) quantitative performance.
C) employee performance.
D) quantitative and qualitative performance.

Question 60

The manager of Center E provides human resource support for the other centers in the company. What type of responsibility center is Center E?

A) Cost center
B) Discretionary cost center
C) Revenue center
D) Investment center

Question 61

Determine the October 20xx ROI (rounded to two decimal places) for an investment center with the following information: Operating income for the month ended October 31, 20xx 5,200,000

A) 26.8 percent
B) 22.8 percent
C) 24.8 percent
D) 28.8 percent

Question 62

Standard costing would most often require which type of performance evaluation?

A) Flexible budgeting
B) Zero-based budgeting
C) Variable costing
D) Any of these choices

Question 63

Use the following performance report for a cost center of the Dry Cat Food Division for the month ended December 31 to answer the question below. The flexible budget is based on how many units produced?

A) 0 units
B) 30 units
C) 70 units
D) 100 units

Question 64

Use the following performance report for a cost center of the Dry Cat Food Division for the month ended December 31 to answer the question below. What is the direct labor variance between the actual results and the flexible budget?

A) $10 (U)
B) $10 (F)
C) $60 (U)
D) $60 (F)

Question 65

Use the following performance report for a cost center of the Dry Cat Food Division for the month ended December 31 to answer the question below. What is the actual total cost?

A) $521
B) $595
C) $744
D) $1,031

Question 66

Use the following performance report for a profit center of the Wet Cat Food Company for the month ended December 31 to answer the question below. What were the actual sales?

A) $180
B) $200
C) $220
D) $240

Question 67

Performance reports should include

A) controllable costs and revenues for a specific responsibility center.
B) all costs, revenues, and resources for a specific responsibility center.
C) controllable costs for a specific responsibility center.
D) controllable costs, revenues, and resources for a specific responsibility center.

Question 68

A good example of a profit center would be

A) a car manufacturer's assembly line.
B) a local Home Depot store.
C) Avis Car Rental's national reservation center.
D) a manufacturer's human resources department.

Question 69

A responsibility center in which the relationship between resources and products or services produced is not well defined is known as a(n)

A) investment center.
B) profit center.
C) cost center.
D) discretionary cost center.

Question 70

Variable costing allows a manager to classify controllable costs as

A) either variable or fixed.
B) variable only.
C) fixed only.
D) either short-term variable or long-term variable.

Question 71

How is the contribution margin calculated when utilizing variable costing?

A) Sales less variable cost of goods sold
B) Sales less variable cost of goods sold, less variable selling and administrative expenses
C) Sales less cost of goods sold
D) Sales less variable cost of goods sold, less variable selling and administrative expenses, less fixed cost of goods sold, less fixed selling and administrative expenses

Question 72

Use the following performance report for a profit center of the Wet Cat Food Company for the month ended December 31 to answer the question below. What was the actual profit center income?

A) $10
B) $20
C) $30
D) $40

Question 73

Dana Klammer is the manager of the Cutting Department in the Northwest Division of Steel Products. Which of the following costs is a controllable cost?

A) Salaries of cutting machine workers
B) Cost of electricity for the Northwest Division
C) Lumber Department hauling costs
D) Vice president's salary

Question 74

A responsibility accounting system ensures that

A) generally accepted accounting principles reporting requirements are met.
B) managers will not be held responsible for items they cannot change.
C) 99 percent of businesses utilizing such a system will be profitable.
D) easy correlations between revenues and costs can be drawn.

Question 75

A variable costing income statement is the same as

A) a contribution margin income statement.
B) a traditional income statement.
C) a cost-volume-profit income statement.
D) none of these choices.

Question 76

Variable costing is utilized to evaluate the performance of

A) investment centers.
B) revenue centers.
C) discretionary cost centers.
D) profit centers.

Question 77

A manager can improve ROI by doing which of the following?

A) Decreasing assets
B) Increasing sales
C) Decreasing costs
D) All of these choices

Question 78

Chow Company has a number of investment centers to track on a day-to-day basis. The following represent key figures related to one of Chow's investment centers for May 2010: $\begin{array}{lr}\text { Operating income } & \$ 6,000,000 \\\text { Sales } & 15,000,000 \\\text { Asset turnover } & 47 \%\end{array}$ What is the investment center's ROI for May 2010 (rounded to two decimal places)?

A) 23.5 percent
B) 28.2 percent
C) 47 percent
D) 18.8 percent

Question 79

Use the following performance report for a cost center of the Dry Cat Food Division for the month ended December 31 to answer the question below. What is the direct materials variance between the actual results and the flexible budget?

A) $14 (U)
B) $14 (F)
C) $30 (U)
D) $30 (F)

Question 80

Which of the following represents the number of sales dollars generated by each dollar invested in assets?

A) Asset turnover
B) Assets invested
C) Profit margin
D) Operating income