SU 16 Performance Measurement and
Process Management questions with
answers.
Controllable revenue would be included in a performance report for a ANS -Profit Center: Yes
Cost Center: No
The following is a summarized income statement of Carr Co.'s profit center No. 43 for the month just
ended:
Which of the following amounts would most likely be subject to the control of the profit center's
manager? ANS -70,000
Which of the following attributes of a management report has the greatest impact on management's
ability to make effective decisions? ANS -Relevance.
In responsibility accounting, a center's performance is measured by controllable costs. Controllable costs
are best described as including ANS -Only those costs that the manager can influence in the current
time period.
Decentralized firms can delegate authority and yet retain control and monitor managers' performance
by structuring the organization into responsibility centers. Which one of the following organizational
segments is most like an independent business? ANS -Investment center.
Rockford Manufacturing Corporation uses a responsibility accounting system in its operations. Which
one of the following items is least likely to appear in a performance report for a manager of one of
Rockford's assembly lines? ANS -Depreciation on the manufacturing facility.
If a manufacturing company uses responsibility centers, which one of the following items is least likely to
appear in a performance report for a manager of an assembly line? ANS -Equipment depreciation.
,In a highly decentralized organization, the best option for measuring the performance of manufacturing
subunits is the establishment of ANS -Cost centers.
A segment of an organization is referred to as a profit center if it has ANS -Authority to make decisions
affecting the major determinants of profit including the power to choose its markets and sources of
supply.
A segment of an organization is referred to as an investment center if it has ANS -Authority to make
decisions affecting the major determinants of profit including the power to choose its markets and
sources of supply and significant control over the amount of invested capital.
Which of the following types of responsibility centers include controllable revenues in their performance
reports? ANS -Cost Center: No
Investment Centers: Yes
Profit Centers: Yes
Which one of the following best identifies a profit center? ANS -A new car sales division for a large local
auto agency.
The least complex segment or area of responsibility for which costs are allocated is a(n) ANS -Cost
center.
Common costs are ANS -Indirect costs.
Managers are most likely to accept allocations of common costs based on ANS -Cause and effect.
Which criterion for allocation of common costs most likely promotes acceptance of the allocation? ANS
-Direct cause-and-effect relationship.
Which of the following indicates that market-based transfer prices would be preferable to cost-based
transfer prices? ANS -The market is perfectly competitive for the intermediate product, and the selling
division has no unused capacity.
, Company A and company B are subsidiaries of company C, a multinational company. A has a fixed
corporate tax rate of 15% and B pays a 25% fixed corporate tax rate. A sells a component to B at a price
ranging from $100 to $200 per unit. Which of the following statements is correct regarding the transfer
price from A to B? ANS -A transfer price of $200 will maximize after-tax profits of A and C.
Nonfinancial performance measures are important to engineering and operations managers in assessing
the quality levels of their products. Which of the following indicators can be used to measure product
quality?
I. Returns and allowances
II. Number and types of customer complaints
III. Production cycle time ANS -I and II only.
Which measures would be useful in evaluating the performance of a manufacturing system?
I. Throughput time
II. Total setup time for machines/total production time
III. Number of rework units/total number of units completed ANS -I, II, and III.
Management of a company is attempting to build a reputation as a world-class manufacturer of quality
products. Which of the following measures would not be used by the firm to measure quality? ANS -The
number of parts shipped per day.
In evaluating an investment center, top management should concentrate on ANS -Return on
investment.
Which of the following performance measures is nonfinancial? ANS -Percentage of defective products.
The following information pertains to Quest Co.'s Gold Division for the year just ended:
Sales $311,000
Variable cost 250,000
Traceable fixed costs 50,000
Process Management questions with
answers.
Controllable revenue would be included in a performance report for a ANS -Profit Center: Yes
Cost Center: No
The following is a summarized income statement of Carr Co.'s profit center No. 43 for the month just
ended:
Which of the following amounts would most likely be subject to the control of the profit center's
manager? ANS -70,000
Which of the following attributes of a management report has the greatest impact on management's
ability to make effective decisions? ANS -Relevance.
In responsibility accounting, a center's performance is measured by controllable costs. Controllable costs
are best described as including ANS -Only those costs that the manager can influence in the current
time period.
Decentralized firms can delegate authority and yet retain control and monitor managers' performance
by structuring the organization into responsibility centers. Which one of the following organizational
segments is most like an independent business? ANS -Investment center.
Rockford Manufacturing Corporation uses a responsibility accounting system in its operations. Which
one of the following items is least likely to appear in a performance report for a manager of one of
Rockford's assembly lines? ANS -Depreciation on the manufacturing facility.
If a manufacturing company uses responsibility centers, which one of the following items is least likely to
appear in a performance report for a manager of an assembly line? ANS -Equipment depreciation.
,In a highly decentralized organization, the best option for measuring the performance of manufacturing
subunits is the establishment of ANS -Cost centers.
A segment of an organization is referred to as a profit center if it has ANS -Authority to make decisions
affecting the major determinants of profit including the power to choose its markets and sources of
supply.
A segment of an organization is referred to as an investment center if it has ANS -Authority to make
decisions affecting the major determinants of profit including the power to choose its markets and
sources of supply and significant control over the amount of invested capital.
Which of the following types of responsibility centers include controllable revenues in their performance
reports? ANS -Cost Center: No
Investment Centers: Yes
Profit Centers: Yes
Which one of the following best identifies a profit center? ANS -A new car sales division for a large local
auto agency.
The least complex segment or area of responsibility for which costs are allocated is a(n) ANS -Cost
center.
Common costs are ANS -Indirect costs.
Managers are most likely to accept allocations of common costs based on ANS -Cause and effect.
Which criterion for allocation of common costs most likely promotes acceptance of the allocation? ANS
-Direct cause-and-effect relationship.
Which of the following indicates that market-based transfer prices would be preferable to cost-based
transfer prices? ANS -The market is perfectly competitive for the intermediate product, and the selling
division has no unused capacity.
, Company A and company B are subsidiaries of company C, a multinational company. A has a fixed
corporate tax rate of 15% and B pays a 25% fixed corporate tax rate. A sells a component to B at a price
ranging from $100 to $200 per unit. Which of the following statements is correct regarding the transfer
price from A to B? ANS -A transfer price of $200 will maximize after-tax profits of A and C.
Nonfinancial performance measures are important to engineering and operations managers in assessing
the quality levels of their products. Which of the following indicators can be used to measure product
quality?
I. Returns and allowances
II. Number and types of customer complaints
III. Production cycle time ANS -I and II only.
Which measures would be useful in evaluating the performance of a manufacturing system?
I. Throughput time
II. Total setup time for machines/total production time
III. Number of rework units/total number of units completed ANS -I, II, and III.
Management of a company is attempting to build a reputation as a world-class manufacturer of quality
products. Which of the following measures would not be used by the firm to measure quality? ANS -The
number of parts shipped per day.
In evaluating an investment center, top management should concentrate on ANS -Return on
investment.
Which of the following performance measures is nonfinancial? ANS -Percentage of defective products.
The following information pertains to Quest Co.'s Gold Division for the year just ended:
Sales $311,000
Variable cost 250,000
Traceable fixed costs 50,000
