Deck 9: Management Control Systems and Responsibility Accounting

Question 1

The first and most basic component in a management control system is the employee's goals.

Answer 1

False

Question 2

Planning in the management control system does NOT include ________.

A) defining goals
B) establishing plans to achieve goals
C) carrying out plans to achieve goals
D) measuring performance measures

Answer 2

D

Question 3

To design a management control system that meets an organization's needs,managers must identify what motivates employees,________ and ________.

A) develop performance measures based on these employee motivators; establish a monitoring and reporting structure for the performance measures
B) develop performance measures to encourage managerial effort; establish a monitoring and reporting structure for productivity
C) develop performance measures that meet organizational objectives; establish an accounting system to measure productivity
D) develop performance measures based on goal congruence; establish an accounting system to measure goal congruence

Answer 3

A

Question 4

The organizational goal of a hotel chain is to increase customer satisfaction.Which of the following is NOT a valid performance measure to meet the organizational goal?

A) number of repeat customers
B) number of complaints by customers
C) occupancy rate
D) average room rate

Question 5

A hotel has the following organizational goal: Increase employee satisfaction.Which one of the following is the best performance measure of the organizational goal?

A) number of new employees trained
B) turnover rate of hotel employees
C) overall rating on employee service on guest satisfaction survey
D) percent of guests writing complaints about employees

Question 6

Which of the following is the first and most basic component in a management control system?

A) the organization's long-range budget
B) the organization's goals
C) the stockholders' goals
D) managerial effort

Question 7

A management control system is a logical integration of techniques to gather and use data and to evaluate performance.

Question 8

Which of the following statements about performance measures is FALSE?

A) Organizational goals without performance measures do not motivate managers.
B) Every performance measure used to evaluate employees should be consistent with organizational goals.
C) An ideal management control system should include at least one performance measure related to every goal.
D) Performance measures become more specific at higher levels of the organization.

Question 9

To increase and improve employees' work efforts in organizations,organizations should link ________ to ________ such as bonuses.

A) motivation; goal congruence
B) managerial effort; key success factors
C) managerial control; motivation
D) performance measures; personal rewards

Question 10

________ are characteristics or attributes that managers must achieve to drive the organization toward its goals.

A) Nonfinancial performance measures
B) Targets
C) Key success factors
D) Objectives

Question 11

Which of the following statements about managerial effort is FALSE?

A) Managerial effort is the exertion towards a goal.
B) Goal congruence must be accompanied by managerial effort.
C) Managerial effort includes all conscious actions that result in more efficiency and effectiveness.
D) Managerial effort does not have to accompany goal congruence.

Question 12

The purpose of performance measures is to set direction and to motivate managers.

Question 13

________ is the logical integration of techniques to gather and use data for planning and control decisions and to evaluate performance.

A) An internal control system
B) A quality control system
C) A financial reporting system
D) A management control system

Question 14

A management control system includes the techniques to gather and use information to ________.

A) motivate employee behavior
B) evaluate performance
C) make planning and control decisions
D) all of the above

Question 15

Measures of performance do not have to be consistent with organizational goals.

Question 16

In the management control system,feedback and learning affect all elements of the system.

Question 17

Most employees perform better when performance reports lead to ________.

A) goal congruence
B) managerial effort
C) managerial control
D) personal rewards

Question 18

________ is the drive for some selected goal that creates effort and action toward that goal.

A) Goal congruence
B) Managerial effort
C) Motivation
D) Personal rewards

Question 19

Elements of the planning and control process for a management control system do NOT include ________.

A) measure, monitor and report
B) plan and execute
C) evaluate and reward
D) feedback and control

Question 20

Goal congruence exists when ________.

A) short-run goals and long-run goals are the same
B) employees respond to incentives created by a management control system and make decisions that help meet the goals of the organization
C) the management control system reflects the organization's goals
D) performance reports are used constructively

Question 21

In most organizational settings,superior ________ performance usually follows from superior ________ performance.

A) financial; nonfinancial
B) nonfinancial; financial
C) financial; strategic
D) nonfinancial; strategic

Question 22

A well-designed management control system ignores nonfinancial objectives and focuses on financial objectives to develop and report performance measures.

Question 23

Effective performance measures have all the following characteristics EXCEPT ________.

A) used consistently and regularly in evaluating and rewarding employees
B) readily understood by employees
C) balance long-term and short-term concerns
D) unaffected by the actions of managers

Question 24

________ costs include those costs that a manager's decisions and actions can influence to a reasonable degree.

A) uncontrollable
B) controllable
C) third party
D) allocated

Question 25

A key driver of performance is the culture within the organization that fosters continual learning and growth.

Question 26

Goal congruence exists when individuals aim at short-term goals and groups aim at long-term organizational goals.

Question 27

For most organizations,an effective management control system requires performance measures that are ________ and ________.

A) rolling; static
B) flexible; static
C) strategic; continuous
D) financial; nonfinancial

Question 28

Good performance measures should only focus on long-term concerns.

Question 29

Organizational learning may be monitored by measuring employee turnover.

Question 30

Nonfinancial measures of performance include profit targets and required return on investment.

Question 31

Organizational learning can NOT be monitored by ________.

A) employee training time
B) employee turnover
C) employee satisfaction scores on internal surveys
D) percentage of employees with children

Question 32

Which one of the following is NOT a nonfinancial performance measure of customer satisfaction on a commercial airline?

A) number of lost bag reports
B) number of flights cancelled
C) number of employees with advanced degrees
D) number of flights on time

Question 33

Nonfinancial performance measures are often lagging indicators that arrive too late to help prevent problems.

Question 34

Managerial effort does not necessarily have to accompany goal congruence.

Question 35

An example of a nonfinancial goal is ________.

A) increase customer satisfaction
B) increase profits
C) increase segment margin
D) increase required return on investment

Question 36

________ performance measures are often ________ indicators that arrive too late to prevent problems in organizations.

A) Nonfinancial; leading
B) Nonfinancial; lagging
C) Financial; leading
D) Financial; lagging

Question 37

Good performance measures should be reasonably subjective.

Question 38

The components of a successful organization are organizational learning,business process improvement,________ and ________.

A) profitability; organizational culture
B) profitability; customer satisfaction
C) customer satisfaction; financial strength
D) goal congruence; managerial effort

Question 39

Which of the following statements about performance reports and variances is FALSE?

A) They are most effective when managers use them positively to encourage employees to improve performance.
B) When they are used negatively, employees will resist and undermine these techniques.
C) These tools should be used to find weaknesses and deficiencies in employees' performance.
D) These tools should be used constructively to influence behavior.

Question 40

Some management experts have said that the only sustainable competitive advantage is the rate at which a company's managers learn.

Question 41

A responsibility center for which separate measures of revenues and costs are obtained is called a(n)________.

A) cost center
B) contribution center
C) contribution margin center
D) segment

Question 42

Wetzel Company has the following information available for the past quarter:
$\begin{array}{llll}&\text { Division A }&\text { Division B }&\text { Division C }\\\text { Sales } & \$ 250,000 & \$ 400,000 & \$ 350,000 \\\text { Variable expenses } & 52 \% & 30 \% & 40 \% \\\text { Fixed expenses controllable by division manager } & \$ 60,000 & \$ 200,000 & \$ 175,000 \\\text { Fixed expenses controllable by others } & \$ 10,000 & \$ 5,000 & \$ 7,500\end{array}$
Unallocated expenses for all three divisions are $22,000.What is the contribution controllable by the division manager in Division C?

A) $5,500
B) $27,500
C) $35,000
D) $210,000

Question 43

The entire firm may be a responsibility center for the firm's president.

Question 44

Segments are responsibility centers for which a separate measure of revenues and costs is obtained.

Question 45

The term "cost center" may be used to describe responsibility centers that are assigned responsibility for capital investment.

Question 46

A responsibility center for controlling revenues and costs is called a revenue center.

Question 47

Which of the following statements about responsibility centers is FALSE?

A) Responsibility centers usually have one goal.
B) Management control systems monitor responsibility center goals.
C) Responsibility centers are usually classified according to their managers' primary financial responsibility.
D) Cost centers, profit centers and investment centers are all examples of responsibility centers.

Question 48

Wingate Company has the following information available for three divisions of the company:
$\begin{array}{llll}&\text { Division A }&\text { Division B }&\text { Division C }\\\text { Sales } & \$ 250,000 & \$ 400,000 & \$ 350,000 \\\text { Variable expenses } & 52 \% & 30 \% & 40 \% \\\text { Fixed expenses controllable by division manager } & \$ 60,000 & \$ 200,000 & \$ 175,000 \\\text { Fixed expenses controllable by others } & \$ 10,000 & \$ 5,000 & \$ 7,500\end{array}$
Unallocated expenses for all three divisions are $22,000.What is the contribution by Division A?

A) $28,000
B) $50,000
C) $60,000
D) $120,000

Question 49

________ costs provide evidence about a manager's performance.________ costs do not provide evidence about a manager's performance.

A) Allocated; unallocated
B) Controllable; uncontrollable
C) Uncontrollable; controllable
D) Allocated; third party

Question 50

Responsibility centers usually have a single goal that the management control system monitors.

Question 51

The manager of a(n)________ responsibility center is responsible for the revenues,costs and invested capital from the center.

A) profit
B) cost
C) investment
D) accounting

Question 52

Wininger Company has the following information available for the past quarter:
$\begin{array}{llll}&\text { Division A }&\text { Division B }&\text { Division C }\\\text { Sales } & \$ 250,000 & \$ 400,000 & \$ 350,000 \\\text { Variable expenses } & 52 \% & 30 \% & 40 \% \\\text { Fixed expenses controllable by division manager } & \$ 60,000 & \$ 200,000 & \$ 175,000 \\\text { Fixed expenses controllable by others } & \$ 10,000 & \$ 5,000 & \$ 7,500\end{array}$
Unallocated expenses for all three divisions are $22,000.What is the contribution controllable by the division manager in Division B?

A) $53,000
B) $75,000
C) $80,000
D) $280,000

Question 53

A profit center can exist in a nonprofit organization.

Question 54

A ________ refers to the set of activities assigned to a manager or a group of managers or other employees.

A) internal control system
B) management control system
C) responsibility center
D) quality control report

Question 55

Managers in profit centers are responsible for controlling ________ and ________.

A) costs; invested capital
B) revenues; invested capital
C) revenues; costs
D) expenses; invested capital

Question 56

Costs uncontrolled by a segment manager should be ________ when evaluating the performance of the segment manager.

A) considered
B) weighed heavily
C) weighed lightly
D) ignored

Question 57

A set of machines may be a responsibility center for a production supervisor.

Question 58

A(n)________ cost is any cost that management cannot reasonably affect within a given time span.

A) controllable
B) quality
C) uncontrollable
D) opportunity

Question 59

In a(n)________ center,managers are responsible for costs only.

A) profit
B) cost
C) investment
D) accounting

Question 60

Evaluations of the responsibility center manager's performance should ignore uncontrollable costs.

Question 61

A manager at a local home improvement store is considering the following costs.Which of the following is a cost controllable by the manager?

A) Salaries of public relations staff at corporate headquarters
B) Salaries of attorneys at corporate headquarters
C) Salary of treasurer of company
D) Salary of head cashier

Question 62

The following information pertains to the Northern Division of Johnson Company:
$\begin{array} { l } \text {Net Sales }&\$21,000\\\end{array}$

Variable Costs:
$\begin{array} { l } \text { Cost of merchandise sold}&7,200\\ \text {Operating expenses }&2,700\\\end{array}$

Fixed costs:
$\begin{array} { l } \text {Controllable by segment manager }&2,400\\ \text {Controllable by others }&1,000\\ \text {Unallocated costs }&7,600\\\end{array}$

The contribution by segment is ________.

A) $7,100
B) $7,700
C) $8,700
D) $11,100

Question 63

The following information pertains to the Southern Division of Swenson Company:
$\begin{array} { l } \text {Net Sales }&\$5,000\\\end{array}$

Variable Costs:
$\begin{array} { l } \text { Cost of merchandise sold}&1200\\ \text {Operating expenses }&450\\\end{array}$

Fixed costs:
$\begin{array} { l } \text {Controllable by segment manager }&600\\ \text {Controllable by others }&250\\ \text {Unallocated costs }&750\\\end{array}$

The contribution by segment is ________.

A) $2,350
B) $2,500
C) $2,750
D) $3,350

Question 64

Assume you are preparing an income statement with different segments.To calculate the contribution by segment,take contribution controllable by segment manager minus ________.

A) unallocated costs
B) variable operating expenses
C) fixed costs controllable by others(not segment manager)
D) fixed costs controllable by segment manager

Question 65

A company manufactures household furniture at several different plants.When preparing segmented income statements for each plant,unallocated costs do NOT include ________.

A) Salaries of attorneys at corporate office
B) Salaries of human resources staff at corporate office
C) Advertising initiated at corporate office
D) Depreciation expense on testing equipment in plant

Question 66

Financial performance of a manager is measured by ________.Financial performance of a segment is measured by ________.

A) contribution by segment; contribution margin
B) contribution margin; net income of segment
C) contribution controllable by segment manager; contribution by segment
D) contribution margin; contribution controllable by segment manager

Question 67

When preparing segmented income statements,fixed costs controllable by others,and not the segment manager,include ________.

A) depreciation on building used by a segment
B) local advertising costs for a segment
C) local promotion costs for a segment
D) salary of supervisor of sales staff for a segment

Question 68

Wendell Company has the following information available for the past quarter:
$\begin{array}{llll}&\text { Division A }&\text { Division B }&\text { Division C }\\\text { Sales } & \$ 250,000 & \$ 400,000 & \$ 350,000 \\\text { Variable expenses } & 52 \% & 30 \% & 40 \% \\\text { Fixed expenses controllable by division manager } & \$ 60,000 & \$ 200,000 & \$ 175,000 \\\text { Fixed expenses controllable by others } & \$ 10,000 & \$ 5,000 & \$ 7,500\end{array}$
Unallocated expenses for all three divisions are $25,000.What is the contribution by Division C?

A) $2,500
B) $27,500
C) $35,000
D) $210,000

Question 69

A grocery store manager is responsible for the operating performance of a grocery store.From the manager's point of view,which of the following is NOT a controllable cost?

A) temporary stocking staff hired to reorganize products in every aisle
B) supplies in break room that include coffee, cups, donuts, cookies and stirring sticks
C) fee charged by pest management company to apply pesticide
D) rent expense on store building

Question 70

Classifying costs as controllable or uncontrollable by a segment manager is ________ and ________.

A) objective; easily undertaken
B) objective; subject to controversy
C) subjective; easily undertaken
D) subjective; subject to controversy

Question 71

The following information is available for Paperback Books Inc.and its two divisions,Books and Periodicals:
$$\begin{array} { l l l } \text { Whole } & \text { Eooks } & \text { Periodicals } \\\text { Company } & \text { Division } & \text { Division }\end{array}$$
Division
$\begin{array} { l } \text {net sales }&\$100,000&\$60,000&\$40,000 \\\end{array}$

Fixed Costs Controllable
$\begin{array} { l } \text {By Division Manager }&26,50&22,500&4,000\\\end{array}$

Fixed Costs Not Controlled
$\begin{array} { l } \text {By Division Manager }&18,000&15,000&3,000\\\end{array}$

Variable Costs:
$$\begin{array} { l l l l } \text { Cost of Merchandise Sold } & 24,500 & 17,500 & 7,000 \\\text { Operating Expenses } & 26,400 & 20,000 & 6,400 \\\text { Unallocated Costs } & 7,000 & &\end{array}$$
What is the contribution margin for the Books Division?

A) $15,000
B) $22,500
C) $32,500
D) $42,500

Question 72

A grocery store manager is responsible for the operating performance of three grocery stores in a small city.From the manager's point of view,which of the following is NOT a controllable cost?

A) cost of advertising for grocery stores sent to residents in local area
B) cost of advertising for grocery stores included in local newspaper
C) cost of flyers with grocery store coupons sent to local residents
D) insurance premium on three store buildings

Question 73

The following information pertains to the Southern Division of Olson Company:
$\begin{array} { l } \text {Net Sales }&\$5,250\\\end{array}$

Variable Costs:
$\begin{array} { l } \text { Cost of merchandise sold}&1,200\\ \text {Operating expenses }&450\\\end{array}$

Fixed costs:
$\begin{array} { l } \text {Controllable by segment manager }&600\\ \text {Controllable by others }&1,250\\ \text {Unallocated costs }&1,150\\\end{array}$

The contribution controllable by a segment manager is ________.

A) $2,350
B) $2,500
C) $3,000
D) $3,350

Question 74

To calculate income before taxes for a segmented company as a whole,take contribution by segments and subtract ________.

A) allocated costs
B) unallocated costs
C) costs controllable by segment managers
D) costs controllable by third parties

Question 75

The following information pertains to the Midwest Division of Clearly Natural Company:
$\begin{array} { l } \text {Net Sales }&125,000\\\end{array}$

Variable Costs:
$\begin{array} { l } \text { Cost of merchandise sold}&7,200\\ \text {Operating expenses }&2,700\\\end{array}$

Fixed costs:
$\begin{array} { l } \text {Controllable by segment manager }&2,400\\ \text {Controllable by others }&1,000\\ \text {Unallocated costs }&600\\\end{array}$

The contribution controllable by a segment manager is ________.

A) $7,100
B) $7,700
C) $11,100
D) $12,700

Question 76

Segment contribution margin less ________ describes the segment contribution that is controllable by segment managers.

A) fixed costs controllable by segment managers
B) fixed costs controlled by others(not segment managers)
C) unallocated costs
D) uncontrollable costs

Question 77

The following information pertains to the East Division of Saturn Company:
$\begin{array} { l } \text { NET SALES}&\$21,000 \\\end{array}$

Variable costs:
$\begin{array} { l } \text { Cost of merchandise sold}& 10,300\\ \text {Operating expenses }&3,700 \\\end{array}$

Fixed costs:
$\begin{array} { l } \text {Controllable by segment manager }& 2,400\\ \text { Controllable by others}&1,000 \\ \text { unallocated costs}&600 \\\end{array}$

The contribution margin of the East Division is ________.

A) $7,000
B) $7,700
C) $8,000
D) $10,700

Question 78

The following information is available for Half Price Books Inc.and its two divisions,Books and Periodicals:
$\begin{array}{lll}&\text { Whole } & \text { Books } & \text { Periodicals } \\&\text { Company } & \text { Division } & \text { Division }\\\text { Net Sales }&\$00,000&\$50,000&\$50,000\end{array}$
Fixed Costs Controllable
$\begin{array} { l } \text {By Division Manager }&26,500&22,500&4,000\\\end{array}$

Fixed Costs Not Controlled
$\begin{array} { l } \text {By Division Manager }&18,000&15,000&3,000\\\end{array}$

Variable Costs:
$$\begin{array} { l l l l } \text { Cost of Merchandise Sold } & 24,500 & 17,500 & 7,000 \\\text { Operating Expenses } & 17,400 & 10,000 & 7,400 \\\text { Unallocated Costs } & 4,000 & &\end{array}$$
What is the contribution margin for the Periodicals Division?

A) $29,600
B) $32,600
C) $35,600
D) $43,000

Question 79

The following information pertains to the West Division of Burger Company:
$\begin{array} { l } \text {net sales }& \$6,000\\\end{array}$

Variable costs:
$\begin{array} { l } \text { Cost of merchandise sold}&1,000 \\ \text {Operating expenses }&450 \\\end{array}$

Fixed costs:
$\begin{array} { l } \text { Controllable by segment mananger}&1,600 \\ \text {Controllable by others }&1,250 \\ \text {unallocated costs }&750 \\\end{array}$

The contribution margin of the West Division is ________.

A) $2,750
B) $3,650
C) $4,350
D) $4,550

Question 80

Assume you are preparing income statements for different segments.Which of the following is NOT a fixed cost controllable by a segment manager?

A) salespersons' salaries for segment
B) advertising costs in local paper to promote segment
C) training costs for new employees at segment
D) segment manager's salary