Question 1

The following static budget is provided:  What will budgeted net income equal if 21,000 units are produced and sold? (Do not round intermediate calculations.)

Accepted Answer

A)   $53,550
B)   $55,500
C)   $94,500
D)   $210,000E) None of the above
F) C) and D)

Question 2

Terra Company has two divisions, the Retail Division and the Wholesale Division. The following information was gathered for the two divisions for the current year:  Assuming that these are the only divisions of Terra Company, what is the ROI for the company as a whole?

Accepted Answer

A)   15.7%
B)   16.3%
C)   16.6%
D)   32.3%E) None of the above
F) B) and C)

Question 3

A disadvantage of decentralization is that it fails to motivate managers to improve the productivity of their division.

Accepted Answer

A) True 
 B)False

Question 4

The Electronics Division of Anton Company reports the following results for the current year:  Anton Company has set a target return on investment (ROI)  of 11% for the Electronics Division. The Electronic Division's margin is:

Accepted Answer

A)   11.25%.
B)   12%.
C)   66.7%.
D)   18%.E) B) and D)
F) A) and B)

Question 5

Timberlake Company planned for a production and sales volume of 12,000 units. However, the company actually made and sold 13,000 units.  What was the sales volume variance?

Accepted Answer

A)   $65,000 favorable
B)   $65,000 unfavorable
C)   $29,800 unfavorable
D)   $29,800 favorableE) None of the above
F) A) and C)

Question 6

The process of evaluating the performance of individual managers is known as:

Accepted Answer

A)   Responsibility accounting.
B)   Management by exception.
C)   Responsibility management.
D)   Performance management.E) B) and C)
F) None of the above

Question 7

Static and flexible budgets are similar in that:

Accepted Answer

A)   They both are based on the same per unit variable amounts and the same fixed costs.
B)   They both concentrate solely on costs.
C)   They both are prepared for multiple activity levels.
D)   None of these answers is correct.E) B) and D)
F) None of the above

Question 8

To avoid suboptimization, many companies prefer to evaluate their investment centers using:

Accepted Answer

A)   Residual income instead of return on investment.
B)   Return on investment instead of residual income.
C)   Gross margin instead of contribution margin.
D)   Sales instead of income.E) None of the above
F) All of the above

Question 9

A reporting unit of a decentralized business that controls identifiable revenue and/or expense items is known as a(n) :

Accepted Answer

A)   Management center.
B)   Performance center.
C)   Accounting center.
D)   Responsibility center.E) C) and D)
F) All of the above

Question 10

Which of the following statements about return on investment (ROI)  is false?

Accepted Answer

A)   ROI equals margin divided by investment turnover.
B)   ROI is used to measure the performance of investment centers.
C)   Seeking to maximize ROI can result in a conflict between the interest of a particular manager and the interest of the business as a whole.
D)   Companies may minimize motivational problems by using original cost instead of book value in the denominator of the ROI formula.E) A) and D)
F) All of the above

Question 11

The New Products Division of Testar Company, had operating income of $8,000,000 and operating assets of $44,800,000 during the current year. The New Products Division has developed a potential new product that would require $8,500,000 in operating assets and would be expected to provide $1,400,000 in operating income each year. Testar has set a target return on investment (ROI)  of 16% for each of its divisions. Assuming that the new product is put into production, calculate the residual income for the division.

Accepted Answer

A)   $832,000
B)   $872,000
C)   $528,000
D)   $672,000E) All of the above
F) A) and D)

Question 12

Which of the following statements regarding investment centers is incorrect?

Accepted Answer

A)   A manager of an investment center is responsible for the investment of capital, but not revenues or expenses.
B)   Investment centers are commonly found at the higher levels of an organization chart.
C)   A manager of an investment center should be accountable for assets, liabilities, and earnings.
D)   Return on investment and residual income are tools used to assess managers of an investment center.E) None of the above
F) A) and D)

Question 13

A favorable flexible budget materials variance may indicate that the price per unit of materials was lower than expected and that less material was used than expected or either of these.

Accepted Answer

A) True 
 B)False

Question 14

A budget prepared at a single volume of activity is referred to as a:

Accepted Answer

A)   Strategic budget.
B)   Standard budget.
C)   Static budget.
D)   Flexible budget.E) C) and D)
F) All of the above

Question 15

The following static budget is provided:  What will be the overall volume variance if 12,000 units are produced and sold?

Accepted Answer

A)   $80,000 F
B)   $80,000 U
C)   $60,000 U
D)   $160,000 UE) A) and B)
F) None of the above

Question 16

Vanessa Grant is responsible for controlling expenses, but is not responsible for generating revenues. Vanessa Grant is a manager of a(n) :

Accepted Answer

A)   Cost center.
B)   Profit center.
C)   Investment center.
D)   Liability center.E) B) and C)
F) A) and D)

Exam 15: Performance Evaluation

A disadvantage of decentralization is that it fails to motivate managers to improve the productivity of their division.

Correct Answer
verified

A budget prepared at a single volume of activity is referred to as a:

Correct Answer
verified

The following static budget is provided: What will budgeted net income equal if 21,000 units are produced and sold? (Do not round intermediate calculations.)

Correct Answer
verified

The following static budget is provided: What will be the overall volume variance if 12,000 units are produced and sold?

Correct Answer
verified

Vanessa Grant is responsible for controlling expenses, but is not responsible for generating revenues. Vanessa Grant is a manager of a(n) :

Correct Answer
verified

Which of the following statements about return on investment (ROI) is false?

Correct Answer
verified

Which of the following statements regarding investment centers is incorrect?

Correct Answer
verified

Timberlake Company planned for a production and sales volume of 12,000 units. However, the company actually made and sold 13,000 units. What was the sales volume variance?

Correct Answer
verified

To avoid suboptimization, many companies prefer to evaluate their investment centers using:

Correct Answer
verified

The Electronics Division of Anton Company reports the following results for the current year: Anton Company has set a target return on investment (ROI) of 11% for the Electronics Division. The Electronic Division's margin is:

Correct Answer
verified

A favorable flexible budget materials variance may indicate that the price per unit of materials was lower than expected and that less material was used than expected or either of these.

Correct Answer
verified

Correct Answer
verified

Terra Company has two divisions, the Retail Division and the Wholesale Division. The following information was gathered for the two divisions for the current year: Assuming that these are the only divisions of Terra Company, what is the ROI for the company as a whole?

Correct Answer
verified

Static and flexible budgets are similar in that:

Correct Answer
verified

The process of evaluating the performance of individual managers is known as:

Correct Answer
verified

A reporting unit of a decentralized business that controls identifiable revenue and/or expense items is known as a(n) :

Correct Answer
verified

Exam 15: Performance Evaluation

A disadvantage of decentralization is that it fails to motivate managers to improve the productivity of their division.

Correct AnswerverifiedShow Answer

A budget prepared at a single volume of activity is referred to as a:

Correct AnswerverifiedShow Answer

The following static budget is provided: What will budgeted net income equal if 21,000 units are produced and sold? (Do not round intermediate calculations.)

Correct AnswerverifiedShow Answer

The following static budget is provided: What will be the overall volume variance if 12,000 units are produced and sold?

Correct AnswerverifiedShow Answer

Vanessa Grant is responsible for controlling expenses, but is not responsible for generating revenues. Vanessa Grant is a manager of a(n) :

Correct AnswerverifiedShow Answer

Which of the following statements about return on investment (ROI) is false?

Correct AnswerverifiedShow Answer

Which of the following statements regarding investment centers is incorrect?

Correct AnswerverifiedShow Answer

Timberlake Company planned for a production and sales volume of 12,000 units. However, the company actually made and sold 13,000 units. What was the sales volume variance?

Correct AnswerverifiedShow Answer

To avoid suboptimization, many companies prefer to evaluate their investment centers using:

Correct AnswerverifiedShow Answer

The Electronics Division of Anton Company reports the following results for the current year: Anton Company has set a target return on investment (ROI) of 11% for the Electronics Division. The Electronic Division's margin is:

Correct AnswerverifiedShow Answer

A favorable flexible budget materials variance may indicate that the price per unit of materials was lower than expected and that less material was used than expected or either of these.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Terra Company has two divisions, the Retail Division and the Wholesale Division. The following information was gathered for the two divisions for the current year: Assuming that these are the only divisions of Terra Company, what is the ROI for the company as a whole?

Correct AnswerverifiedShow Answer

Static and flexible budgets are similar in that:

Correct AnswerverifiedShow Answer

The process of evaluating the performance of individual managers is known as:

Correct AnswerverifiedShow Answer

A reporting unit of a decentralized business that controls identifiable revenue and/or expense items is known as a(n) :

Correct AnswerverifiedShow Answer

Correct Answer
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