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Chapter 10 Performance Measurement in Decentralized Organizations questions with answers.

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Chapter 10 Performance Measurement in Decentralized Organizations questions with answers.

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Chapter 10 Performance Measurement in
Decentralized Organizations questions
with answers.
True or false: In strongly decentralized organizations, even the lowest-level managers can make
decisions. ANS -True



Reason:

Decentralized operations often allow the lower-levels of management to make decisions because they
are most familiar with the day-to-day operations.



Lower-level managers are empowered to make decisions in a ______ organization, which can ________
motivation and job satisfaction. ANS -decentralized, increase



Which of the following is not one of the three primary types of responsibility centers? ANS -sales



The manager of a(n) ______ center does not have control over revenue or the use of investment funds.
ANS -cost



Net operating income ÷ Average operating assets = ANS -Return on investment



An organization in which decision-making authority is spread throughout the organization is ______.
ANS -decentralized



Net operating income is income before ______ and ______. ANS -interest , taxes



Operations are able to respond quickly to customers and changes in the environment in a decentralized
organization because ______. ANS -there are fewer managers that must be consulted before a decision
is made



Which of the following ratios are part of the ROI formula? ANS -Net operating income ÷ Sales

, Sales ÷ Average operating assets



Any part of an organization whose manager has control over and is accountable for cost, profit, or
investments is a(n) ______________ center. ANS -responsibility



Valid criticisms of evaluating performance based on return on investment (ROI) include managers may
______. ANS -be put in charge of a business segment that includes committed costs over which a
manager has no control



reject investment opportunities that are profitable for the company but have a negative impact on a
manager's ROI



take actions that increase ROI in the short-run at the expense of long-term performance



Managers of cost centers are expected to ______. ANS -minimize costs, while providing an acceptable
level of service



Return on investment = ANS -Net operating income ÷ Average operating assets



Net operating income - (Average operating assets × Minimum required rate of return) = ANS -residual
income



EBIT is another term for ______. ANS -net operating income



Which of the following statements is correct? ANS -A manager might reject a proposal using ROI that
the manager would accept using residual income.



ROI can be calculated as ______. ANS -net operating income ÷ average operating assets



margin × turnover

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