Question 1

Net income after interest and taxes is a common income measurement choice used to calculate ROI for an entire organization,because all expenses are under the CEO's control at the corporate level.

Accepted Answer

Net income after interest and taxes includes expenses that may not be under the control of the CEO, such as taxes and interest payments. Additionally, ROI may be calculated at different levels of an organization, not just the corporate level, and may focus on specific projects or investments rather than the whole organization.

Question 2

An investment center manager's performance is typically measured based on the

Accepted Answer

An investment center manager's performance is typically measured based on the return on investment (ROI) and residual income, not just "the."

Question 3

Although a profit center is expected to generate profits,not just revenues or costs,the manager cannot commit funds to invest in assets.

Accepted Answer

True

Question 4

Generally accepted accounting principles require companies to report selected information about operating segments in the annual report.

Accepted Answer

This statement is true. Companies are required to report segment information in their annual reports in accordance with Generally Accepted Accounting Principles (GAAP). This segment reporting provides investors and analysts with a more detailed view of a company's performance by breaking down its operations into different segments or business units.

Question 5

A cost center manager's performance is measured largely by comparing the actual costs incurred to the flexible budget.

Accepted Answer

A cost center manager's performance is typically evaluated based on the actual costs incurred compared to the flexible budget, as this helps to determine if the manager effectively controlled costs and used resources efficiently.

Question 6

A disadvantage of decentralized decision making is that two or more operational managers may evaluate and make the same decision,duplicating their efforts.

Accepted Answer

Decentralized decision making allows for individual managers to make decisions, which can lead to duplicate efforts if multiple managers make the same decision without coordinating with each other.

Question 7

After an organization implements a certain level of decentralization,it is committed to maintaining that level for the life of the organization.

Accepted Answer

While an organization may choose to implement a certain level of decentralization, it does not necessarily mean that it is committed to maintaining that level for the life of the organization. Circumstances such as changes in leadership, shifts in organizational priorities, and external factors may lead to a re-evaluation and potential adjustment of the level of decentralization.

Question 8

You cannot classify a unit as a cost, profit, or investment center by looking at its name or its location on the organizational chart.

Accepted Answer

The statement "You cannot classify a" does not provide any information to classify. Therefore, it is true that you cannot classify a.

Question 9

A segment margin income statement includes all allocated costs in the calculation of the segment margin.

Accepted Answer

A segment margin income statement excludes all allocated costs in the calculation of segment margin,

Question 10

A disadvantage of decentralization is that the process does not give lower-level managers practice in developing their decision-making skills.

Accepted Answer

Decentralization typically involves delegating decision-making authority to lower-level managers, which can give them more opportunities to develop their decision-making skills.

Question 11

The goal of the cost center manager is to minimize total costs and to maximize profit.

Accepted Answer

The goal of the cost center manager is to minimize costs, but not necessarily to maximize profit. Cost centers are responsible for managing costs within a specific department or function, rather than generating revenue or profit for the organization as a whole.

Question 12

If a cost was incurred to support the company as a whole,then it is a common cost.

Accepted Answer

Common costs are those that support the company as a whole and cannot be directly allocated to a specific product, department or customer.

Question 13

Return on investment measures the rate of return generated by an investment in assets.

Accepted Answer

Return on investment (ROI) is a financial calculation that measures the amount of return an investor receives in relation to the amount of investment. It is typically expressed as a percentage and is used to evaluate the efficiency or profitability of an investment. Therefore, the statement is true.

Question 14

In preparing a segment margin income statement,instead of looking for a certain phrase that describes the cost,look for the reason the cost was incurred.

Accepted Answer

When preparing a segment margin income statement, it is helpful to identify the reason the cost was incurred rather than simply looking for a certain phrase. This can help provide a more accurate reflection of the profitability of each segment.

Question 15

A profit center manager's performance is measured using methods such as return on investment or residual income.

Accepted Answer

A profit center manager's performance is typically measured based on the unit's overall profit compared to the flexible budget,

Question 16

An organizational structure in which decision-making authority for the entire organization rests in the hands of one person or a small group of people in a single location is called decentralization.

Accepted Answer

The statement describes a centralized organizational structure, not a decentralized one.

Question 17

A manager who is responsible for both the revenue and the cost incurred in generating a product is managing an investment center.

Accepted Answer

A manager responsible for both revenue and cost is managing a profit center, not an investment center. An investment center also includes responsibility for assets and investments.

Question 18

An organizational structure in which decision-making authority for the entire organization rests in the hands of one person or a small group of people in a single location is called centralization.

Accepted Answer

The statement accurately defines centralization.

Question 19

If a cost is a traceable fixed cost at one level,it will remain a traceable cost at a lower level.

Accepted Answer

Costs that were traceable fixed costs at one level may become a common fixed cost at a lower level,

Question 20

A segment of an organization is any part of the organization that management wishes to evaluate.

Accepted Answer

A segment refers to a specific part or division of an organization that is being evaluated for various reasons such as performance, profitability, and efficiency.

Quiz 10: Decentralizing and Performance Evaluation