chapter 18 multiple choice

The six steps Ittner and Larcker propose for maximizing the value of nonfinancial measures when using a balanced scorecard include all the following except: A. Continually refine the model. B. Assess outcomes. C. Gather data. D. Base actions on the data. E. Base actions on the findings of the model.

D. Base actions on the data.

Production or support SBUs within the firm that have the goal of providing the best quality product or service at the lowest cost are: A. Revenue centers. B. Contribution centers. C. Profit centers. D. Cost centers. E. Investment centers.

D. Cost centers.

For production and support departments, a method of implementing cost centers that is inputoriented is the: A. Budget slack method. B. Cost shifting method. C. Outsourcing method. D. Discretionary-cost method. E. Engineered-cost method.

D. Discretionary-cost method.

The objectives of management control of the manager include: A. Cost, quality, and functionality. B. Management by objectives. C. Management by exception. D. Motivation, incentive and fairness. E. Identification, response and performance.

D. Motivation, incentive and fairness.

The process by which managers at all levels in the firm gain information about the performance of tasks within the firm and judge that performance against pre-established criteria is: A. Performance measurement. B. Employee inspection. C. Goal congruence. D. Managerial evaluation. E. Management control.

A. Performance measurement.

What is an appropriate performance evaluation measure for the early stage of a product's life cycle? A. Revenue. B. Strategy. C. Asset management. D. Profitability.

A. Revenue.

The least common type of SBU in a retail firm is the: A. Profit center. B. Cost center. C. Revenue center. D. Investment center

B. Cost center.

The sales life cycle has three phases: early, growth, and maturity. The appropriate performance measures for the growth phase include A. Profitability, market penetration. B. Profitability, strategy. C. Revenue, strategy. D. Profitability, asset management

D. Profitability, asset management

A strategic business unit (SBU) consists of a well-defined set of controllable operating activities over/about which the SBU manager is: A. Knowledgeable. B. Responsible for strategy. C. Responsible for strategy and execution. D. Responsible for strategy, execution, and performance.

D. Responsible for strategy, execution, and performance.

What costs are treated as product costs under variable costing? A. Only variable costs. B. Only variable production costs. C. All variable costs. D. All variable and fixed manufacturing costs.

B. Only variable production costs.

By not distinguishing between direct and indirect costs in their performance reporting, many companies: A. Generate more useful control potential for managers. B. Can cause poor decision-making. C. Focus on long-term results. D. Focus on short-term results. E. Clearly distinguish between controllable and non-controllable costs.

B. Can cause poor decision-making.

Which one of the following is a drawback of decentralization? A. Uses local knowledge only. B. May hinder coordination among independent SBUs. C. Provides less effective operational control. D. May affect goal congruence. E. Offers an inefficient method of performance evaluation.

B. May hinder coordination among independent SBUs.

Cost allocation of service department costs to production departments make the evaluation and control processes in the production departments: A. Simpler. B. More complex. C. Forthright and fair. D. Less efficient. E. Counter-productive.

B. More complex.

The most important objective of a strategic performance measurement system is: A. Budgeting. B. Motivation. C. Authority. D. Variances. E. Pricing.

B. Motivation

Profit center income statements are most meaningful to managers when they are prepared: A. On a full cost basis. B. On a cost behavior basis. C. On a cash basis. D. In a single-step format. E. In a multiple-step format

B. On a cost behavior basis.

The evaluation of operating level employees by mid-level managers is: IMPORTANT A. Performance evaluation. B. Operational control. C. Goal congruence. D. Principal-agent model. E. Management control

B. Operational control.

Expenditures made in revenue centers usually include: A. Order-purchasing costs. B. Order-getting costs. C. Order-producing costs. D. Order-scheduling costs. E. Order-delivering costs.

B. Order-getting costs.

In the principal-agent model, the manager is modeled as having all of the following elements except: A. Risk aversion. B. Outcomes of actions. C. Provides effort. D. Decision-making.

B. Outcomes of actions.

Operational control has a management-by-exception approach in contrast to management control, which is more consistent with: A. The management-by-incentives approach. B. The management-by-objectives approach. C. The "hands off" approach. D. A non-quantitative set of measures. E. A non-qualitative set of measures

B. The management-by-objectives approach.

The principal-agent economic model applied to employment contracts deals primarily with the two management performance aspects of: A. Rights and duties. B. Uncertainty and lack of observability. C. Performance and reward. D. Controllability and responsibility. E. Risk and motivation.

B. Uncertainty and lack of observability.

Among the benefits of centralized management in a firm is (are): A. Effective goal congruence. B. Utilization of top management expertise. C. Effective participation by all levels of management. D. A higher level of motivation for divisional managers.

B. Utilization of top management expertise.

The main concept of the balanced scorecard is that, to evaluate the SBU's progress to strategic success, an organization must use all of the following except: A. Both financial and non-financial measures. B. Value chain analysis. C. Measures of customer satisfaction. D. Multiple measures for a comprehensive evaluation.

B. Value chain analysis.

The value stream income statement provides the following information not usually contained in the contribution income statement: A. Allocated fixed costs B. Contribution by profit center. C. A separate accounting for the effect of inventory change on profit. D. A separate accounting for the effect of productivity change on profit

C. A separate accounting for the effect of inventory change on profit.

The manager acting independently in such a way as to simultaneously achieve top management's objectives is: A. Performance evaluation. B. Operational control. C. Goal congruence. D. Principal-agent model. E. Management control.

C. Goal congruence.

Which of the following is an advantage of decentralization? A. Promote coordination among SBUs. B. Limits conflicts among SBUs. C. Motivates managers. D. Offers qualitative method of performance evaluation

C. Motivates managers.

Risk aversion is by: A. Lack of a strategic emphasis in decision making. B. Use of non-strategic performance measurement systems. C. Presence of uncertainty in a manager's environment. D. A manager's inability to deal with stress.

C. Presence of uncertainty in a manager's environment.

Which of the following is not a criterion for choosing the cost allocation method? A. Motivate managers. B. Provide an incentive for managers. C. Profitability focus. D. Basis for fair evaluation.

C. Profitability focus.

The contribution by profit center (CPU) expands the contribution margin income statement by distinguishing: A. Variable and fixed costs. B. Short-term and long-term fixed costs. C. Controllable and non-controllable fixed costs. D. Noncontrollable and untraceable fixed costs. E. Net income and contribution margin.

D. Noncontrollable and untraceable fixed costs.

25. A model that has been used to better understand the key elements that contracts must have in order to achieve the desired objectives is the: A. Performance evaluation. B. Operational control. C. Goal congruence. D. Principal-agent model. E. Management control.

D. Principal-agent model.

In a formal management control system, top management sets expectations for desired manager performance. Which of the following is not one of the areas in which a formal individual management control system would be used? A. Hiring practices. B. Promotion policies. C. Operations. D. Sales. E. Organizational culture

D. Sales.

Which of the following is not a principle of employment contracts? A. Separation of performance of the manager from performance of the SBU. B. Exclude known uncontrollable factors from the contract. C. Interests of manager may not align with those of top management. D. Uncertainty affects future wages.

D. Uncertainty affects future wages.

For production and support departments, a method of implementing cost centers that is output-oriented is the: A. Budget slack method. B. Cost shifting method. C. Outsourcing method. D. Discretionary-cost method. E. Engineered-cost method

E. Engineered-cost method

SBUs that include the assets they employ as well as profits in the performance evaluation are: A. Revenue centers. B. Contribution centers. C. Profit centers. D. Cost centers. E. Investment centers.

E. Investment centers.

The evaluation by upper-level managers of the performance of mid-level managers is: IMPORTANT A. Performance evaluation. B. Operational control. C. Goal congruence. D. Principal-agent model. E. Management control.

E. Management control.

In properly developing formal systems at the team level that will have the desired impact on employees' performance, the management accountant should recognize any existing informal systems and: A. Make plans to eliminate these informal systems. B. Simply formalize them into the system being developed. C. Try to eliminate them prior to system development. D. Not let these "culture" aspects affect system development. E. Try to capture valued "culture" aspects in the formal system.

E. Try to capture valued "culture" aspects in the formal system.