Chapter 23: Performance Evaluation and the Balanced Scorecard
23.1-1 Small companies tend to use centralized decision making because of the smaller scope of their operations.
Answer: True
Difficulty: 1
LO: 23-1
EOC Ref: S23-1
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Decision Making
23.1-2 Companies that decentralize split their operations into different divisions or operating units and top
management delegates decision-making to the division/unit managers.
Answer: True
Difficulty: 1
LO: 23-1
EOC Ref: S23-2
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Decision Making
23.1-3 A potential benefit of decentralization is that it allows top management to concentrate on long-term
strategic planning.
Answer: True
Difficulty: 1
LO: 23-1
EOC Ref: S23-3
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Decision Making
23.1-4 The Frito-Lay division of PepsiCo is most likely treated as a(n):
A) cost center.
B) revenue center.
C) profit center.
D) investment center.
Answer: D
Difficulty: 2
LO: 23-1
EOC Ref: S23-2
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
,23.1-5 The central reservation office at American Airlines is most likely treated as a(n):
A) cost center.
B) revenue center.
C) profit center.
D) investment center.
Answer: B
Difficulty: 2
LO: 23-1
EOC Ref: S23-2
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
23.1-6 A product line at Coca-Cola is most likely treated as a(n):
A) cost center.
B) revenue center.
C) profit center.
D) investment center.
Answer: C
Difficulty: 2
LO: 23-1
EOC Ref: S23-2
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
23.1-7 Which of the following is a cost center?
A) A company’s legal department
B) A company’s sales staff
C) A product line of a particular company
D) A company’s individual stores
Answer: A
Difficulty: 2
LO: 23-1
EOC Ref: S23-2
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Reporting
23.1-8 Which of the following would be considered a profit center?
A) A company’s accounting department
B) A company’s sales department
C) A company’s product line
D) A company’s identifiable operating divisions
Answer: C
Difficulty: 2
LO: 23-1
EOC Ref: S23-2
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Reporting
2
,23.1-9 The manager of a cost center has control of:
A) revenues.
B) investment decisions.
C) expenses.
D) investment funds.
Answer: C
Difficulty: 1
LO: 23-1
EOC Ref: S23-3
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Reporting
23.1-10 The manager of a profit center has control of:
A) revenues and expenses.
B) investment decisions and operating income.
C) revenues and financing decisions.
D) investment funds.
Answer: A
Difficulty: 1
LO: 23-1
EOC Ref: S23-3
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Reporting
23.1-11 The human resources department would most likely be considered to be which of the following?
A) Cost center
B) Revenue center
C) Investment center
D) Profit center
Answer: A
Difficulty: 1
LO: 23-1
EOC Ref: S23-3
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Reporting
23.1-12 Which of the following would most likely be evaluated using return on investment?
A) Cost center
B) Profit center
C) Revenue center
D) Investment center
Answer: D
Difficulty: 1
LO: 23-1
EOC Ref: S23-10
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
3
, 23.1-13 The production line at Gateway Computers is most likely treated as a(n):
A) cost center.
B) revenue center.
C) profit center.
D) investment center.
Answer: A
Difficulty: 2
LO: 23-1
EOC Ref: S23-2
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
23.1-14 Which of the following is not a potential advantage of decentralization?
A) Top management can use their time to concentrate on long-term strategic planning rather than daily
operations.
B) Customer relations are generally improved.
C) It improves the motivation and retention of division managers.
D) Decentralization promotes goal congruence and coordination.
Answer: D
Difficulty: 2
LO: 23-1
EOC Ref: E23-13
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Decision Making
23.2-1 Performance evaluation systems provide top management with a framework for maintaining control over
the organization.
Answer: True
Difficulty: 1
LO: 23-2
EOC Ref: S23-4
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Measurement
23.2-2 A benefit of decentralization is that it increases the difficulty of goal congruence.
Answer: False
Difficulty: 1
LO: 23-2
EOC Ref: S23-4
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Decision Making
4
23.1-1 Small companies tend to use centralized decision making because of the smaller scope of their operations.
Answer: True
Difficulty: 1
LO: 23-1
EOC Ref: S23-1
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Decision Making
23.1-2 Companies that decentralize split their operations into different divisions or operating units and top
management delegates decision-making to the division/unit managers.
Answer: True
Difficulty: 1
LO: 23-1
EOC Ref: S23-2
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Decision Making
23.1-3 A potential benefit of decentralization is that it allows top management to concentrate on long-term
strategic planning.
Answer: True
Difficulty: 1
LO: 23-1
EOC Ref: S23-3
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Decision Making
23.1-4 The Frito-Lay division of PepsiCo is most likely treated as a(n):
A) cost center.
B) revenue center.
C) profit center.
D) investment center.
Answer: D
Difficulty: 2
LO: 23-1
EOC Ref: S23-2
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
,23.1-5 The central reservation office at American Airlines is most likely treated as a(n):
A) cost center.
B) revenue center.
C) profit center.
D) investment center.
Answer: B
Difficulty: 2
LO: 23-1
EOC Ref: S23-2
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
23.1-6 A product line at Coca-Cola is most likely treated as a(n):
A) cost center.
B) revenue center.
C) profit center.
D) investment center.
Answer: C
Difficulty: 2
LO: 23-1
EOC Ref: S23-2
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
23.1-7 Which of the following is a cost center?
A) A company’s legal department
B) A company’s sales staff
C) A product line of a particular company
D) A company’s individual stores
Answer: A
Difficulty: 2
LO: 23-1
EOC Ref: S23-2
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Reporting
23.1-8 Which of the following would be considered a profit center?
A) A company’s accounting department
B) A company’s sales department
C) A company’s product line
D) A company’s identifiable operating divisions
Answer: C
Difficulty: 2
LO: 23-1
EOC Ref: S23-2
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Reporting
2
,23.1-9 The manager of a cost center has control of:
A) revenues.
B) investment decisions.
C) expenses.
D) investment funds.
Answer: C
Difficulty: 1
LO: 23-1
EOC Ref: S23-3
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Reporting
23.1-10 The manager of a profit center has control of:
A) revenues and expenses.
B) investment decisions and operating income.
C) revenues and financing decisions.
D) investment funds.
Answer: A
Difficulty: 1
LO: 23-1
EOC Ref: S23-3
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Reporting
23.1-11 The human resources department would most likely be considered to be which of the following?
A) Cost center
B) Revenue center
C) Investment center
D) Profit center
Answer: A
Difficulty: 1
LO: 23-1
EOC Ref: S23-3
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Reporting
23.1-12 Which of the following would most likely be evaluated using return on investment?
A) Cost center
B) Profit center
C) Revenue center
D) Investment center
Answer: D
Difficulty: 1
LO: 23-1
EOC Ref: S23-10
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
3
, 23.1-13 The production line at Gateway Computers is most likely treated as a(n):
A) cost center.
B) revenue center.
C) profit center.
D) investment center.
Answer: A
Difficulty: 2
LO: 23-1
EOC Ref: S23-2
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Measurement, Reporting
23.1-14 Which of the following is not a potential advantage of decentralization?
A) Top management can use their time to concentrate on long-term strategic planning rather than daily
operations.
B) Customer relations are generally improved.
C) It improves the motivation and retention of division managers.
D) Decentralization promotes goal congruence and coordination.
Answer: D
Difficulty: 2
LO: 23-1
EOC Ref: E23-13
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Decision Making
23.2-1 Performance evaluation systems provide top management with a framework for maintaining control over
the organization.
Answer: True
Difficulty: 1
LO: 23-2
EOC Ref: S23-4
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Measurement
23.2-2 A benefit of decentralization is that it increases the difficulty of goal congruence.
Answer: False
Difficulty: 1
LO: 23-2
EOC Ref: S23-4
AACSB: Reflective Thinking
AICPA Business Perspective Competencies: Critical Thinking
AICPA Functional Competencies: Decision Making
4
