Question 1

A product line is generally considered a profit center.

Accepted Answer

A product line is a group of related products that are sold by the same company. It is considered a profit center because it generates revenue and profitability for the company. Companies often focus on their product lines to optimize their profitability and offer a variety of products to meet the needs of different customers.

Question 2

Goal congruence is a system that evaluates the performance of each responsibility center and its manager.

Accepted Answer

Goal congruence refers to the alignment of the objectives of individual managers or departments with the overall objectives of the organization, rather than the evaluation of performance.

Question 3

Decentralized companies often struggle to achieve goal congruence in an organization.

Accepted Answer

Decentralized companies can have multiple decision-makers and it may be difficult to align their individual goals with the overall goals of the organization, resulting in a lack of goal congruence.

Question 4

Decentralization allows top management to concentrate on long-term strategic planning.

Accepted Answer

Decentralization delegates decision-making power to lower levels of management, allowing top management to focus on big-picture, long-term strategic planning rather than day-to-day operations.

Question 5

Potential duplication of costs is a disadvantage of decentralized organizations.

Accepted Answer

Decentralized organizations may lead to duplication of costs as each department or unit may have its own budget and resources, leading to inefficiencies and higher costs.

Question 6

There are two types of responsibility centers.

Accepted Answer

There are more than two types of responsibility centers, including cost centers, revenue centers, profit centers, and investment centers.

Question 7

Management by exception directs management's attention to a large variance between an actual and budget amount in a performance report.

Accepted Answer

Management by exception is a management strategy that focuses attention on areas where performance deviates significantly from plans or standards, which includes identifying and investigating large variances between actual and budgeted amounts in performance reports.

Question 8

Decentralization allows top management to hire workers with expert knowledge in each business unit.

Accepted Answer

Decentralization means that decision-making authority is delegated to lower-level managers and employees. This allows for hiring workers with specific expertise in each business unit, who can make informed decisions and contribute to the success of the organization.

Question 9

Companies that decentralize split their operations into different operating segments.

Accepted Answer

Decentralization involves dividing operations into smaller segments, often located in different locations or departments, that have more autonomy and decision-making power.

Question 10

Responsibility accounting performance reports compare plans (budgets)with actual results in each responsibility center.

Accepted Answer

Responsibility accounting performance reports are designed to compare plans (budgets) with actual results in each responsibility center to provide information to management about how well the center is performing.

Question 11

Small companies tend to use decentralized decision making.

Accepted Answer

The answer of Small companies tend to use decentralized decision...

Question 12

An example of management by exception occurs when a manager investigates a large variance in a performance report to assign responsibility.

Accepted Answer

Management by exception is focused on identifying and investigating significant variances or deviations from expected performance. When a large variance appears in a performance report, a manager using management by exception principles would investigate the cause and assign responsibility for addressing the issue.

Question 13

The accounting department in a convenience store chain is likely classified as a cost center.

Accepted Answer

The accounting department is not directly generating revenue for the convenience store chain and typically incurs costs for maintaining financial records and preparing financial reports. Therefore, it is likely classified as a cost center.

Question 14

The local Burger King restaurant is likely classified as a revenue center.

Accepted Answer

A local Burger King restaurant is more accurately classified as a profit center because it is responsible for generating revenue through sales and also has control over its costs, thereby influencing its profits.

Question 15

Goal congruence is more likely to occur at a centralized organization rather than a decentralized organization.

Accepted Answer

Centralized organizations have a more uniform structure, with decision-making power concentrated at the top. This allows for greater control and alignment of goals throughout the organization, leading to more consistent goal congruence. Decentralized organizations, on the other hand, may have more varied goals and decision-making processes across different departments or locations, making it more difficult to achieve overall goal congruence.

Question 16

Decentralization may duplicate a company's costs because each business unit can contain its own purchasing department.

Accepted Answer

Decentralization can result in duplicate costs such as purchasing, accounting, and management functions because each unit operates independently and may need to have its own resources to perform these functions.

Question 17

A profit center is the responsibility center that is only responsible for costs.

Accepted Answer

A profit center is responsible for both costs and revenues. Its main goal is to generate a profit for the organization by increasing revenues and/or reducing costs.

Question 18

All of the following are responsibility centers except
A)cost center.
B)profit center.
C)investment center.
D)equity center.

Accepted Answer

There is no such thing as an "equity center" in management accounting terms. The three common types of responsibility centers are cost centers, profit centers, and investment centers.

Question 19

In a(n)________ center, managers are accountable to both revenues and costs.
A)cost
B)profit
C)equity
D)investment

Accepted Answer

In a profit center, managers have responsibility for both generating revenues and controlling costs in order to create a profit for the organization. This differs from a cost center, where the focus is solely on managing and minimizing costs, and an investment center, where managers are accountable for generating returns on investments. Equity centers do not exist as a common organizational structure.

Question 20

An investment center is generally a large division of a corporation.

Accepted Answer

An investment center is a business unit or division within a corporation that has control over its own decisions regarding investments in assets and projects to generate revenue and profits. Such centers are usually large and operated as profit centers within the corporation.

Quiz 10: Performance Evalulation