QUESTION 1

Which of the following isnotan advantage of Decentralization?

1. a.Upper-level management is encouraged to concentrate on strategic decisions.
2. b.Managers are motivated to improve productivity.
3. c.Lower-level managers are trained to accept less responsibility.
4. d.Improves performance evaluation.

QUESTION 2

When comparing the responsibility reports of the Vice President of manufacturing and the Assembly Line Foreman it would be expected that the:

1. a.Responsibility reports are the same.
2. b.Foreman has more summarization about the assembly line than the VP.
3. c.VP has more summarization about the assembly line than the foreman.

4.d.VP has more detail about the assembly line than the foreman.

QUESTION 3

In developing a Responsibility Report it is expected that the manager exerts:

1. a.Absolute Control.
2. b.Minimal Control.
3. c.Predominant Control.
4. d.No Control.

QUESTION 4

Responsibility Reports highlight unusual items that managers can then analyze and aid in their control of the operational goals and objectives. The form of management is referred to as:

1. a.Management by Objective
2. b.Management by Exception
3. c.Management by Benchmarking
4. d.Management Control

QUESTION 5

A difference between a Cost Center and a Profit Center is that a:

1. a.Cost Center is responsible for revenues and expenses.
2. b.Cost Center and a Profit Center are both only responsible for the same expenses.
3. c.Cost Center is not responsible for expenses.
4. d.Cost Center is not responsible for revenues.

QUESTION 6

ROI is impacted by all of the following factors except:

1. a.Net Income
2. b.Contribution Margin
3. c.Sales
4. d.Investment

QUESTION 7

Prices at which products or services are sold between corporate divisions is referred to by the purchasing division as:

1. a.Sales Price
2. b.Sales Cost
3. c.Transfer Price
4. d.Transfer Expense

QUESTION 8

In setting a Transfer Price the goal of the individual Divisional Managers is typically to:

1. a.Maximize corporate revenue.
2. b.Have the buying division pay the lowest price, so overall corporate costs will be as low as possible.
3. c.Have the selling division charge a high price helping to increase corporate sales.
4. d.Maximize the profitability of each division.

QUESTION 9

The controllability concept is usually implemented based upon:

1. a.Some Control
2. b.Absolute control
3. c.Predominant control
4. d.Ideal Control

QUESTION 10

Qualitative Features of a Responsibility Report include all of the following except:

1. a.Complete Accuracy
2. b.Variances
3. c.Relevant Information
4. d.Timely

QUESTION 11

Which of the following would improve a firm's return on investment?

1. a.Raising sales prices and incurring higher expenses.
2. b.Increasing earnings and investment in assets.
3. c.Lowering sales prices and increasing asset investment.
4. d.Increasing revenues, decreasing expenses, and decreasing investment in assets.

QUESTION 12

In computing ROI many companies utilize "Operating Income and Operating Assets" because:

1. a.Net Income and Net Assets are not performance measures.
2. b.Non-operating assets are not always under the control of the manager being evaluated.
3. c.Managers can determine what items they feel they should be evaluated based upon.
4. d.Net Income is a Financial Statement concept.

QUESTION 13

Which concept is crucial to an effective responsibility accounting system?

1. a.Net Income.
2. b.Divisional Income.
3. c.ROI.
4. d.Controllability.

QUESTION 14

Responsibility Reports

1. a.Should be simple.
2. b.Should express qualitative aspects of the entire company
3. c.Should contain information on fellow divisions to encourage communication.
4. d.Should not be relevant to the manager's performance.

QUESTION 15

The Margin

1. a.expresses the amount of assets used to produce earnings.
2. b.expresses qualitative aspects of a manager's performance.
3. c.expresses the manager's ability at controlling expenses relative to sales.
4. d.expresses the manager's performance relative to turnover.

QUESTION 16

Monster Mash produces Computer Games. Mash's balance sheet indicates $450,000 in Operating Assets. Their Operating Income was $121,500 from Sales of $810,000.

Compute Monster Mash's ROI.

1. a.11 %
2. b.18 %
3. c.23.2 %
4. d.27 %

QUESTION 17

Monster Mash produces Computer Games. Mash's balance sheet indicates $450,000 in Operating Assets. Their Operating Income was $121,500 from Sales of $810,000.

A logical explanation for Monster Mash's high ROI might be

1. a.Monster uses a lot of assets, making the ROI higher.
2. b.Monster uses few assets, yet sales and income are high.
3. c.Although Monster's sales are low, profit and assets are high.
4. d.Monster should decrease sales to match the assets used.

QUESTION 18

Monster Mash produces Computer Games. Mash's balance sheet indicates $450,000 in Operating Assets. Their Operating Income was $121,500 from Sales of $810,000.

Monster Mash's has a desired ROI of 20%. What is Mash's residual income?

1. a.$22,500
2. b.$31,500
3. c.$90,000
4. d.$121,500

QUESTION 19

1. Monster Mash produces Computer Games. The Explosion Division uses $112,500 in Operating Assets. Their Operating Income was $30,375 from Sales of $202,500. Mash offered the manager of the Explosion Division an opportunity to use new explosive effect software costing $100,000. The ROI of the new software is expected to be 18%. Mash has a desired ROI of 15%.

What will the manager of the Explosion Division most likely do assuming s/he is evaluated based on ROI? (hint - calculate current ROI)

1. a.Reduce the amount of assets used in their division.
2. b.Not invest in the software, even though it will increase divisional ROI.
3. c.Invest in the new software to increase operating income
4. d.Suboptimize, choosing not to use the new software.

QUESTION 20

The Sultans currently earn $100,000 in Net Income using equipment that cost $500,000. Ticket sales are $800,000. Guitar George wants to invest in new guitars costing $50,000. George figures all the chords he plays will attract a new audience and sales will increase to $1,000,000.

What is the Sultans current ROI?

1. a.20%
2. b.20.83%
3. c.28%
4. d.29.33%