ACC 516 Chapter 24 questions with
answers.
Characteristics of Performance Measurement ANS -1. Integral part of management control systems
2. Required for making strategic planning and control decisions
3. Motivate managers and employees at all levels of the organization to achieve company strategies and
goals
Internal financial information based on what ANS -accounting numbers routinely reported
Internal financial measures supplemented by measure often benchmarked against others ANS -1.
External financial information
2. Internal nonfinancial information
3. External nonfinancial information
Example of external financial information ANS -Stock prices
Example of internal nonfinancial information ANS -defect rates, manufacturing lead time, productivity,
number of new patents
Example of external nonfinancial information ANS -customer satisfaction ratings and market share
Balances scorecard uses a report for ANS -financial and nonfinancial performance measures
Design of an accounting-based performance ANS -Step 1: Choose performance measures that align with
top management's financial goal(s)
Step 2: Choose the time horizon of each performance measure in Step 1
Step 3: Choose a definition of the components in each performance measure in Step 1
Step 4: Choose a measurement alternative for each performance measure in Step 1
, Step 5: Choose a target level of performance. Step 6: Choose the timing of feedback
Investment ANS -resources or assets used to generate income
Return in Investment ANS -an accounting measure of income divided by an an accounting measure of
investment
Characteristics of Return on Investment ANS -i. Most popular approach to measure performance
ii. Can be compared with opportunities inside or outside company
iii. Varied definitions for both numerator and denominator
Increase ROI by ANS -1. Increasing revenues using assets to generate an additional amount
2. Decreasing costs (increase income per dollar of revenue)
3. Decreasing investment (decreasing idle cash, managing credit judiciously, determining proper
inventory levels, and spending carefully on fixed assets)
Residual Income ANS -An accounting measure of income minus a dollar amount for required return on
an accounting measure of investment
Equation for residual income ANS -Income - (RRR x Investment)
Imputed cost ANS -Recognized in particular situations that are not usually recognized by accrual
accounting procedures
Imputed cost of the investment ANS -RRR x Investment
Imputed cost of equity ANS -Return forgone by not investing in other equity securities of similar risk
Characteristics of RI ANS -1. Objective of maximizing absolute dollars
answers.
Characteristics of Performance Measurement ANS -1. Integral part of management control systems
2. Required for making strategic planning and control decisions
3. Motivate managers and employees at all levels of the organization to achieve company strategies and
goals
Internal financial information based on what ANS -accounting numbers routinely reported
Internal financial measures supplemented by measure often benchmarked against others ANS -1.
External financial information
2. Internal nonfinancial information
3. External nonfinancial information
Example of external financial information ANS -Stock prices
Example of internal nonfinancial information ANS -defect rates, manufacturing lead time, productivity,
number of new patents
Example of external nonfinancial information ANS -customer satisfaction ratings and market share
Balances scorecard uses a report for ANS -financial and nonfinancial performance measures
Design of an accounting-based performance ANS -Step 1: Choose performance measures that align with
top management's financial goal(s)
Step 2: Choose the time horizon of each performance measure in Step 1
Step 3: Choose a definition of the components in each performance measure in Step 1
Step 4: Choose a measurement alternative for each performance measure in Step 1
, Step 5: Choose a target level of performance. Step 6: Choose the timing of feedback
Investment ANS -resources or assets used to generate income
Return in Investment ANS -an accounting measure of income divided by an an accounting measure of
investment
Characteristics of Return on Investment ANS -i. Most popular approach to measure performance
ii. Can be compared with opportunities inside or outside company
iii. Varied definitions for both numerator and denominator
Increase ROI by ANS -1. Increasing revenues using assets to generate an additional amount
2. Decreasing costs (increase income per dollar of revenue)
3. Decreasing investment (decreasing idle cash, managing credit judiciously, determining proper
inventory levels, and spending carefully on fixed assets)
Residual Income ANS -An accounting measure of income minus a dollar amount for required return on
an accounting measure of investment
Equation for residual income ANS -Income - (RRR x Investment)
Imputed cost ANS -Recognized in particular situations that are not usually recognized by accrual
accounting procedures
Imputed cost of the investment ANS -RRR x Investment
Imputed cost of equity ANS -Return forgone by not investing in other equity securities of similar risk
Characteristics of RI ANS -1. Objective of maximizing absolute dollars
