Question 1

A type of responsibility center which is typically established whenever an organizational unit has control over both its resources and its products or services is a(n)
A) investment center.
B) revenue center.
C) expense center.
D) profit center.
E) standard cost center.

Accepted Answer

A profit center has control over both its resources and its products or services, and is accountable for generating profits. The other options (investment center, revenue center, expense center, and standard cost center) do not necessarily have control over both resources and products/services, or are not specifically accountable for generating profits.

Question 2

Which of the following is not one of the areas in which goals or objectives should be developed for use in the balanced scorecard approach?
A) customer
B) innovation and learning
C) financial
D) stakeholder
E) internal business perspective

Accepted Answer

Stakeholder is not one of the traditional areas for goal or objective development in the balanced scorecard approach. The four traditional areas are financial, customer, internal business perspective, and innovation and learning. However, some organizations may choose to include stakeholders as a separate area in their balanced scorecard.

Question 3

A responsibility center which measures resources in dollars without consideration of service or product costs is called a(n)
A) investment center.
B) revenue center.
C) expense center.
D) profit center.
E) standard cost center.

Accepted Answer

An expense center is focused on measuring and controlling costs (resources in dollars) without directly considering the costs of services or products produced. It is primarily concerned with minimizing expenses or staying within budgetary constraints.

Question 4

What responsibility center is judged for effectiveness rather than efficiency?
A) investment center
B) revenue center
C) standard cost center
D) profit center
E) expense center

Accepted Answer

Revenue centers are primarily judged based on their effectiveness in generating sales or revenue, rather than on their efficiency in using resources. Efficiency is more closely associated with cost or expense management, which is not the primary focus of a revenue center.

Question 5

List the five-step feedback model of the evaluation and control process.

Accepted Answer

The answer of List the five-step feedback model of the...

Question 6

Which of the following is not descriptive of responsibility centers?
A) They are used to the extent that they can isolate specific functional units such as R&D.
B) Each responsibility center has its own budget and is evaluated on its use of budgeted resources.
C) The responsibility center coordinates all the functional areas and project developments to implement the strategic decision plan.
D) The center uses resources to produce a service or a product.
E) A responsibility center is headed by the manager responsible for the center's performance.

Accepted Answer

Responsibility centers are not responsible for coordinating all the functional areas and project developments to implement the strategic decision plan; that responsibility lies with higher-level management. The other options are all accurate descriptors of responsibility centers.

Question 7

Return on investment (ROI)is the most widely used measure of performance in what responsibility center?
A) revenue center
B) expense center
C) investment center
D) profit center
E) standard cost center

Accepted Answer

ROI is a measure of how effectively a business uses its capital investments. Therefore, it is most commonly applied in investment centers where managers have the authority to make decisions regarding investments that impact the overall ROI of the organization. This helps in evaluating performance and determining the allocation of resources.

Question 8

The comparison of the expected cost of production against the actual cost of production typically occurs in the
A) investment center.
B) revenue center.
C) standard cost center.
D) profit center.
E) expense center.

Accepted Answer

The comparison of the expected cost of production against the actual cost of production is typically done in a standard cost center, where predetermined standards for cost are set and then compared to the actual costs incurred. This allows for cost variances to be identified and analyzed, and for corrective action to be taken if necessary.

Question 9

A multidivisional corporation like GE would tend to use what type of responsibility center?
A) expense center
B) investment center
C) profit center
D) standard cost center
E) revenue center

Accepted Answer

The answer of A multidivisional corporation like GE would tend...

Question 10

A responsibility center which measures performance in terms of the difference between revenues (which measure production)and expenditures (which measure resources)is a(n)
A) investment center.
B) revenue center.
C) expense center.
D) profit center.
E) standard cost center.

Accepted Answer

A profit center measures the performance based on the difference between revenues and expenditures. This approach encourages the center to generate revenues while keeping costs in check in order to earn profits. This type of center is often found in organizations that are decentralized and have a focus on profitability. The other options (investment center, revenue center, expense center, and standard cost center) do not specifically measure performance based on the difference between revenues and expenditures.

Question 11

What is the most commonly used measure of corporate performance (in terms of profits)? Discuss the limitations of using this measure.

Accepted Answer

The answer of What is the most commonly used measure...

Question 12

Unlike ROI,managers cannot manipulate the numbers of EVA.

Accepted Answer

EVA (Economic Value Added) calculations can also be subject to manipulation through the choice of capital charge rate, adjustments in capital employed, and operating income adjustments, similar to how ROI (Return on Investment) figures can be influenced by managerial decisions and accounting practices.

Question 13

The revenue center is measured in terms of efficiency.

Accepted Answer

The revenue center is measured in terms of profitability, not efficiency.

Question 14

The balanced scorecard combines financial measures that tell the results of actions already taken with operational measures on customer satisfaction,internal processes,and the corporation's innovation and improvement activities.

Accepted Answer

The statement accurately describes the concept of the balanced scorecard.

Question 15

Distinguish between behavior and output controls.Provide examples of each.

Accepted Answer

The answer of Distinguish between behavior and output controls.Provide examples...

Question 16

Management audits have been developed to evaluate activities such as corporate social responsibility,functional areas such as the marketing department,and divisions such as the international division.

Accepted Answer

Management audits can be conducted on various levels such as corporate social responsibility, functional areas, and divisions within the organization.

Question 17

The balanced scorecard approach to evaluation and control assigns to each goal/objective in an area one or more measures that are each essential for achieving a desired strategic option.These measures are called
A) critical success factors.
B) strategic factors.
C) key performance measures.
D) behavioral measures.
E) responsibility centers.

Accepted Answer

The measures assigned to each goal/objective in the balanced scorecard approach are called key performance measures. Critical success factors, strategic factors, behavioral measures, and responsibility centers are all related concepts, but they do not specifically refer to the measures assigned in the balanced scorecard approach.

Question 18

What is the difference between EVA and MVA?

Accepted Answer

The answer of What is the difference between EVA and...

Question 19

EVA may eventually replace ROI as the standard performance measure.

Accepted Answer

EVA (Economic Value Added) is a more comprehensive performance metric that takes into account the actual cost of capital and measures the value created by a business. It is gaining popularity and may eventually replace ROI (Return on Investment) as the standard performance measure.

Question 20

Stickiness and eyeballs are two non-financial performance measures used by Internet business ventures.

Accepted Answer

Stickiness refers to the amount of time users spend on a website, while eyeballs refer to the number of unique visitors to a website. Both are non-financial performance measures commonly used in Internet business ventures.

Quiz 12: Evaluation and Control

A type of responsibility center which is typically established whenever an organizational unit has control over both its resources and its products or services is a(n)

Which of the following is not one of the areas in which goals or objectives should be developed for use in the balanced scorecard approach?

A responsibility center which measures resources in dollars without consideration of service or product costs is called a(n)

What responsibility center is judged for effectiveness rather than efficiency?

List the five-step feedback model of the evaluation and control process.

Which of the following is not descriptive of responsibility centers?

Return on investment (ROI) is the most widely used measure of performance in what responsibility center?

The comparison of the expected cost of production against the actual cost of production typically occurs in the

A multidivisional corporation like GE would tend to use what type of responsibility center?

A responsibility center which measures performance in terms of the difference between revenues (which measure production) and expenditures (which measure resources) is a(n)