Multiple Choice Questions:

1) In a balanced scorecard, which of the following is a key performance indicator of the customer perspective?

A) Defect rate

B) Employee satisfaction

C) Gross margin growth

D) Number of repeat customers

2) Which of the following statements is true of performance reporting?

A) Responsibility reports should focus on the person responsible for unfavorable variances, rather than information.

B) Managers should not be held accountable for uncontrollable variances.

C) Only unfavorable variances should be explained in the reports.

D) Every variance, regardless of magnitude, must be investigated by the managers.

3) To evaluate the performance of an investment center, a business needs key performance indicators that measure:

A) Manufacturing efficiency and product defect rate.

B) Operating income and efficient use of assets.

C) Customer satisfaction and market share.

D) Generation of sales revenues and control of operating expenses.

4) Which of the following is the correct formula for calculating return on investment?

A) Net profit ÷ Sales

B) Gross profit ÷ Sales

C) Operating profit ÷ Average total assets

D) Earnings available to stockholders ÷ Number of outstanding stock.

5) Which of the following is the correct formula for calculating residual income?

A) Weighted Average Cost of Capital - Net Operating Profit after Tax

B) Operating income - Minimum acceptable operating income

C) Historical cost of assets - Accumulated depreciation

D) Operating income ÷ Average assets