CBAD 202 Final Exam questions well
answered to pass
Decentralization - correct answer ✔✔Splitting operations into different operating segments
Advantages of Decentralization - correct answer ✔✔-Knowledge of local requirements
-Local sourcing
-Less bureaucracy
Disadvantages of Decentralization - correct answer ✔✔-duplication of costs
-problems achieving goal congruence
Performance Evaluation is Important Why? - correct answer ✔✔Provides upper management with
feedback
Performance evaluation systems should? - correct answer ✔✔- Clearly communicate expectations
- Provide benchmarks that promote goal congruence and coordination between segments
- Motivate segment managers
Responsibility Accounting - correct answer ✔✔Dividing the organization up into centers of
responsibilities then evaluating performance of each responsibility center and its manger
Favorable Variance - correct answer ✔✔GOOD THINGS
Operating income will be higher than budgeted
Unfavorable Variance - correct answer ✔✔NOOT GOOD THINGS
Operating income will be lower than budgeted
,The Budget Variance is calculated by - correct answer ✔✔variance divided by the budget amount
Return on Investment - correct answer ✔✔Measures the amount of income an investment center earns
relative to the size of its assets
ROI is found by - correct answer ✔✔Operating income / Total Assets
Residual Income - correct answer ✔✔- Determines whether the division has created any excess
(residual) income above management's expectations
- Incorporates target rate of return
RI is found by - correct answer ✔✔Operating income - minimal acceptable income
Operating income - (target rate of return x total assets)
Limitations of Financial Performance Evaluation - correct answer ✔✔- Short-term focus
- Potential Remedy: management can measure financial performance using a longer time horizon
Transfer Pricing - correct answer ✔✔When one department uses products produced by another
department within the company. When this happens a price must be set between departments.
- They may use market pricing
- They can negotiate a price
- Cost or cost plus pricing
Flexible Budgets - correct answer ✔✔- Fairer option to evaluate managers
- often the budget is prepared for a different level of volume than that which was originally anticipated
Master Budget Variance - correct answer ✔✔Difference between the actual revenues and expenses and
the master budgets
- Does not result in a correct comparison
, - The fair option is to compare actual volume and what the results should have been based on that new
volume
Volume Variance - correct answer ✔✔The difference between the master budget and the flexible budget
Volume Variance arises only because the ____________ ____________ differs from the volume
____________ anticipated in the __________ __________ - correct answer ✔✔actual volume
originally
master budget
Flexible Budget Variance - correct answer ✔✔The difference between the flexible budget and the actual
results
The Balanced Scorecard - correct answer ✔✔- Management must consider both financial and
operational performance measures
- Major Shift: Financial indicators are no longer the sole measure of performance
Four Perspectives of the Balanced Scorecard - correct answer ✔✔- Financial
- Customer
- Internal Business
- Learning and Growth
Key Performance Indicator (KPI) - correct answer ✔✔- Summary performance metric; assesses how well
the company is achieving its goals
- Continually measured
- Reported on performance scorecard or performance dashboard
Financial Perspective - correct answer ✔✔- "How do we look to shareholders?"
- Must continually attempt to increase profits
~ Increase revenues
answered to pass
Decentralization - correct answer ✔✔Splitting operations into different operating segments
Advantages of Decentralization - correct answer ✔✔-Knowledge of local requirements
-Local sourcing
-Less bureaucracy
Disadvantages of Decentralization - correct answer ✔✔-duplication of costs
-problems achieving goal congruence
Performance Evaluation is Important Why? - correct answer ✔✔Provides upper management with
feedback
Performance evaluation systems should? - correct answer ✔✔- Clearly communicate expectations
- Provide benchmarks that promote goal congruence and coordination between segments
- Motivate segment managers
Responsibility Accounting - correct answer ✔✔Dividing the organization up into centers of
responsibilities then evaluating performance of each responsibility center and its manger
Favorable Variance - correct answer ✔✔GOOD THINGS
Operating income will be higher than budgeted
Unfavorable Variance - correct answer ✔✔NOOT GOOD THINGS
Operating income will be lower than budgeted
,The Budget Variance is calculated by - correct answer ✔✔variance divided by the budget amount
Return on Investment - correct answer ✔✔Measures the amount of income an investment center earns
relative to the size of its assets
ROI is found by - correct answer ✔✔Operating income / Total Assets
Residual Income - correct answer ✔✔- Determines whether the division has created any excess
(residual) income above management's expectations
- Incorporates target rate of return
RI is found by - correct answer ✔✔Operating income - minimal acceptable income
Operating income - (target rate of return x total assets)
Limitations of Financial Performance Evaluation - correct answer ✔✔- Short-term focus
- Potential Remedy: management can measure financial performance using a longer time horizon
Transfer Pricing - correct answer ✔✔When one department uses products produced by another
department within the company. When this happens a price must be set between departments.
- They may use market pricing
- They can negotiate a price
- Cost or cost plus pricing
Flexible Budgets - correct answer ✔✔- Fairer option to evaluate managers
- often the budget is prepared for a different level of volume than that which was originally anticipated
Master Budget Variance - correct answer ✔✔Difference between the actual revenues and expenses and
the master budgets
- Does not result in a correct comparison
, - The fair option is to compare actual volume and what the results should have been based on that new
volume
Volume Variance - correct answer ✔✔The difference between the master budget and the flexible budget
Volume Variance arises only because the ____________ ____________ differs from the volume
____________ anticipated in the __________ __________ - correct answer ✔✔actual volume
originally
master budget
Flexible Budget Variance - correct answer ✔✔The difference between the flexible budget and the actual
results
The Balanced Scorecard - correct answer ✔✔- Management must consider both financial and
operational performance measures
- Major Shift: Financial indicators are no longer the sole measure of performance
Four Perspectives of the Balanced Scorecard - correct answer ✔✔- Financial
- Customer
- Internal Business
- Learning and Growth
Key Performance Indicator (KPI) - correct answer ✔✔- Summary performance metric; assesses how well
the company is achieving its goals
- Continually measured
- Reported on performance scorecard or performance dashboard
Financial Perspective - correct answer ✔✔- "How do we look to shareholders?"
- Must continually attempt to increase profits
~ Increase revenues
