Question 1

Which of the following is a non-financial measure of performance?

Accepted Answer

Market share is a non-financial measure of performance because it represents the percentage of a company's sales within a particular market or industry. The other options (return on investment, earnings per share, return on equity) are all financial measures of performance.

Question 2

SSM Corporation,a multinational healthcare system,measures the number of minutes between a patient's arrival at the emergency room and the time he/she is seen by a physician. This measure focuses on what aspect of the balanced scorecard?

Accepted Answer

The measure of the number of minutes between a patient's arrival at the emergency room and the time he/she is seen by a physician focuses on the "internal business processes perspective" of the balanced scorecard, as it is an indicator of the efficiency and effectiveness of the healthcare system's processes in delivering timely care to patients.

Question 3

Which of the following should NOT be included in implementing performance evaluation systems?

Accepted Answer

Changing the performance evaluation system annually can create confusion and inconsistency in the evaluation process. It is important to establish a stable and consistent system to ensure fairness and accuracy in performance evaluations.

Question 4

Which of the following is not measured by the accounting system of a multinational corporation?

Accepted Answer

Translation exposure and transaction exposure are both measured by the accounting system of a multinational corporation. Economic exposure, on the other hand, is not directly measured by the accounting system as it involves the impact of exchange rate movements on the corporation's future cash flows and market value.

Question 5

In designing an effective management control system for a multinational corporation,the accountant should measure factors appropriate for each unit's level of responsibility. Which of the following measures would be appropriate for evaluating the performance of a profit center?

Accepted Answer

The answer of In designing an effective management control system...

Question 6

MSM Ltd has a strategy of being the first to market with new products and so it measures the number of new products introduced each year. Where does this measure fit in the balanced scorecard?

Accepted Answer

The measure of the number of new products introduced each year aligns with the innovation and learning perspective of the balanced scorecard, which focuses on the organization's ability to innovate and develop new products or services. This perspective measures the organization's success in introducing new and improved products and services to meet customer needs and stay ahead of competition.

Question 7

Assume that the Chinese government allowed the yuan to float relative to the U.S.dollar. Appreciation in the yuan could have an adverse affect on sales of Chinese goods to the U.S. This possible impact on Chinese exports is referred to as:

Accepted Answer

Economic exposure refers to the potential impact of currency fluctuation on the profitability and competitiveness of a company. In the case of Chinese exports, if the yuan appreciates against the U.S. dollar, it would make Chinese goods more expensive for U.S. buyers, which could hurt sales and profitability of Chinese exporters. Translation exposure refers to the impact of currency fluctuations on the translation of a company's financial statements from one currency to another. Transaction exposure refers to the impact of currency fluctuations on specific transactions involving a foreign currency. Accounting exposure is another term for translation exposure.

Question 8

According to surveys in the U.S.and the United Kingdom,what are the most frequently used financial performance measures by multinational organizations?

Accepted Answer

Surveys in the U.S. and the United Kingdom have consistently shown that the most frequently used financial performance measures by multinational organizations are budgeted profit vs. actual profit, return on investment, and profit. While stock price and sales may be important metrics, they are not typically used as frequently as the measures listed in option C. Internal rate of return may also be used but is not as commonly cited as budgeted profit vs. actual profit, return on investment, and profit.

Question 9

The balanced scorecard includes non-financial measures of performance with the financial measures of performance traditionally used. Which of the following are included in the balanced scorecard?

Accepted Answer

The balanced scorecard includes all of the above options, which are customer satisfaction, internal business processes, and innovation and learning. These non-financial measures of performance are included to provide a more holistic view of an organization's overall performance and to ensure that it is not solely focused on financial performance. By including these other measures, organizations can better understand how well they are meeting customer needs, how efficient and effective their internal processes are, and how well they are fostering innovation and learning within the organization.

Question 10

What result can be expected if a management control system encourages managers to focus on inappropriate measures?

Accepted Answer

If a management control system encourages managers to focus on inappropriate measures, they may engage in dysfunctional behaviors such as cheating, manipulating data, or neglecting other important aspects of their responsibilities to achieve the target measures. This can ultimately lead to negative consequences for the company in the long run.

Question 11

If only one currency is used for evaluating subsidiary performance in a multinational corporation,what currency is it most likely to be?

Accepted Answer

When a multinational corporation uses only one currency to evaluate subsidiary performance, it is most likely to be the currency of the parent company's home country. This is because the parent company's financial statements and reports are typically prepared in their home currency, and it is the currency that is most familiar and commonly used by management. Using the home currency also facilitates consolidation of financial statements and comparison of performance across subsidiaries. While using the local currency of the subsidiary may also be an option, this can be more complex and may require additional resources to convert the data into a common currency for evaluation. Using euros is less likely, as not all multinational corporations operate in countries that use the euro, and using no currency would not allow for effective evaluation of performance.

Question 12

How should multinational corporations reduce the impact of economic exposure?

Accepted Answer

Competitive strategic and operational decisions can help multinational corporations reduce the impact of economic exposure by allowing them to adjust their operations to the specific economic conditions of each country in which they operate.

Question 13

Holding managers accountable only for those factors over which they have control is called:

Accepted Answer

Responsibility accounting is the practice of holding managers accountable only for the factors over which they have control. This allows for more accurate assessment of individual manager performance and encourages decision-making that aligns with the organization's goals. Management control systems and centralization/decentralization are broader concepts that can encompass multiple elements of organizational structure and decision-making, whereas responsibility accounting specifically focuses on individual manager accountability.

Question 14

In designing an effective management control system for a multinational corporation,the accountant should measure factors appropriate for each unit's level of responsibility. Which of the following measures would be appropriate for evaluating the performance of a cost center?

Accepted Answer

Output volume is an appropriate measure for evaluating the performance of a cost center as it indicates how much output the cost center is producing for the given cost incurred. As cost centers do not generate revenues, measures like return on investment and EBIT are not applicable. Residual income might not be appropriate as it is a measure of economic profit and not directly related to the inputs and outputs of a cost center.

Question 15

What measures may be used in the performance evaluation system of a multinational corporation?

Accepted Answer

The performance evaluation system of a multinational corporation should include financial measures such as profit, cost, and return on investment, as well as non-financial measures such as quality and customer satisfaction and market share to provide a comprehensive evaluation. By using all of these measures, the company can gauge its financial health and its ability to meet customer demand, which are both essential factors for a successful multinational corporation.

Question 16

Which of the following statements is true about performance evaluation in a multinational organization?

Accepted Answer

Divisional performance can be influenced by a wide range of factors beyond a manager's control, such as economic conditions, exchange rates, and local market dynamics. Therefore, it is not accurate to equate divisional performance directly with managerial performance.

Question 17

What is the advantage of using operating income or EBIT as a measure of performance in a profit center of a multinational corporation?

Accepted Answer

Operating income or EBIT (earnings before interest and taxes) is a popular measure of performance for profit centers because it excludes interest and taxes, which are beyond the control of divisional managers. This allows managers to focus on improving operational efficiency, productivity, and profitability. Furthermore, it provides a clear picture of the core business operations' financial performance, making it easier to compare the performance of different profit centers. However, it is important to note that this measure should not be used in isolation as it does not consider the long-term implications of managerial decisions on assets and investments.

Question 18

The Squeaky Division of Household Products Corporation showed a net loss of £5,000,000 last year,but Squeaky's manager received a bonus for outstanding performance. Why would Household Products' management control system appropriately allow for this apparent inconsistency?

Accepted Answer

The management control system may appropriately allow for this apparent inconsistency if the net loss was due to economic factors outside the manager's control. In this case, the bonus would not be tied to the net profit or loss of Squeaky Division specifically, but rather to the manager's overall performance and contribution to the company as a whole. Additionally, the bonus may have been based on other factors such as achieving certain sales goals or cost reductions, which could still be deemed as outstanding performance despite the net loss.

Question 19

What is the likely outcome of using performance measures that subsidiary managers perceive to be unachievable?

Accepted Answer

When managers perceive performance measures to be unachievable, they are likely to become frustrated and may lose motivation. This can lead to disengagement from the performance measurement process and a lack of effort to improve performance. As a result, the desired outcomes of diligent attention to operational efficiency, success, and optimal decision-making are unlikely to be achieved.

Question 20

Under what condition should the gain or loss from translating foreign currency profit of subsidiary into the parent's home currency be included in the subsidiary's measure of performance?

Accepted Answer

If the subsidiary manager is authorized to hedge the translation exposure, they have control over the impact of currency fluctuations, making it appropriate to include the gain or loss in performance measures.

Quiz 13: Strategic Accounting Issues in Multinational Corporations