Test Bank For Accounting 9th Edition By Horngren Harrison Oliver

Accounting, 9e (Horngren)
Chapter 24 Performance Evaluation and the Balanced Scorecard

Learning Objective 24-1

1) When a small company grows to a large size, it may decide to decentralize because it is difficult for one owner
(or manager) to manage an entire, large business.
Answer: TRUE
Diff: 1
LO: 24-1
EOC Ref: S24-1
AACSB: Content/Knowledge
AICPA Business: Critical Thinking
AICPA Functional: Decision Modeling

2) Small companies tend to use centralized decision-making because of the smaller scope of their operations.
Answer: TRUE
Diff: 1
LO: 24-1
EOC Ref: S24-1
AACSB: Reflective Thinking
AICPA Business: Critical Thinking
AICPA Functional: Decision Modeling

3) Companies that are centralized split their operations into different divisions or operating units and top
management delegates decision-making to the division/unit managers.
Answer: FALSE
Diff: 1
LO: 24-1
EOC Ref: S24-1
AACSB: Content/Knowledge
AICPA Business: Critical Thinking
AICPA Functional: Decision Modeling

4) A benefit of decentralization is that it allows top management to concentrate on long-term strategic planning.
Answer: TRUE
Diff: 1
LO: 24-1
EOC Ref: S24-1
AACSB: Content/Knowledge
AICPA Business: Critical Thinking
AICPA Functional: Decision Modeling




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Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

,5) In a decentralized business, a typical cost center is responsible for not only the profit and loss of its business, but
also for the evaluation and return on capital investment projects.
Answer: FALSE
Diff: 1
LO: 24-1
EOC Ref: S24-1
AACSB: Content/Knowledge
AICPA Business: Critical Thinking
AICPA Functional: Decision Modeling

6) Which of the following is an advantage of decentralization?
A) May create disparities in alignment of goals between different business units
B) May cause inconsistencies in the way various business units operate
C) May duplicate costs and functions across multiple business units
D) Helps prepare and train managers at lower levels for higher positions later on
Answer: D
Diff: 1
LO: 24-1
EOC Ref: S24-2
AACSB: Content/Knowledge
AICPA Business: Critical Thinking
AICPA Functional: Decision Modeling

7) Which of the following is a disadvantage of decentralization?
A) Promotes use of specialized skills and knowledge
B) Helps business keep closer relationships with customers
C) May duplicate costs and functions across multiple business units
D) Helps prepare and train managers at lower levels for higher positions later on
Answer: C
Diff: 1
LO: 24-1
EOC Ref: S24-2
AACSB: Content/Knowledge
AICPA Business: Critical Thinking
AICPA Functional: Decision Modeling

8) Which of the following BEST describes the term goal congruence?
A) The creation of a strategic plan that sets managers' goals
B) The alignment of unit managers' goals with those of upper management and shareholders
C) A set of incentives for managers to achieve performance targets
D) Making sure that compensation packages for managers at equivalent levels are equal
Answer: B
Diff: 1
LO: 24-1
EOC Ref: S24-1
AACSB: Content/Knowledge
AICPA Business: Critical Thinking
AICPA Functional: Decision Modeling




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Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

,9) 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
Diff: 1
LO: 24-1
EOC Ref: S24-2
AACSB: Analytic Skills
AICPA Business: Critical Thinking
AICPA Functional: Measurement, Reporting

10) The central reservations 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
Diff: 2
LO: 24-1
EOC Ref: S24-2
AACSB: Analytic Skills
AICPA Business: Critical Thinking
AICPA Functional: Measurement, Reporting

11) 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
Diff: 2
LO: 24-1
EOC Ref: S24-2
AACSB: Analytic Skills
AICPA Business: Critical Thinking
AICPA Functional: Measurement, Reporting

12) Which of the following is a cost center?
A) A company's legal department
B) A company's sales department
C) A product line of a particular company
D) A company's individual stores
Answer: A
Diff: 2
LO: 24-1
EOC Ref: S24-2
AACSB: Analytic Skills
AICPA Business: Critical Thinking
AICPA Functional: Reporting




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Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall

, 13) 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 operating divisions
Answer: C
Diff: 2
LO: 24-1
EOC Ref: S24-2
AACSB: Analytic Skills
AICPA Business: Critical Thinking
AICPA Functional: Reporting

14) The manager of a cost center has control of:
A) revenues.
B) investment decisions.
C) expenses.
D) investment funds.
Answer: C
Diff: 1
LO: 24-1
EOC Ref: S24-2
AACSB: Content/Knowledge
AICPA Business: Critical Thinking
AICPA Functional: Reporting

15) 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
Diff: 1
LO: 24-1
EOC Ref: S24-2
AACSB: Content/Knowledge
AICPA Business: Critical Thinking
AICPA Functional: Reporting

16) The human resources department would most likely be considered a(n):
A) cost center.
B) revenue center.
C) investment center.
D) profit center.
Answer: A
Diff: 1
LO: 24-1
EOC Ref: S24-2
AACSB: Analytic Skills
AICPA Business: Critical Thinking
AICPA Functional: Reporting




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Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall