A306 Module 4 Exam Review

Carlos, Inc. requires a minimum rate of return of 10% on its average operating assets. The housewares department currently has average operating assets of $200,000 and a net operating income of $24,000. The department's residual income is ______. A) $4,000 B) $2,000 C) $2,880 D) $480

A) $4,000

Which of the following statements is correct? A) A manager might reject a proposal using ROI that the manager would accept using residual income. B) Managers will be more likely to pursue projects that will benefit the entire company when being evaluated on ROI instead of residual income. C) A project that is not acceptable using residual income calculations may be acceptable when ROI is calculated.

A) A manager might reject a proposal using ROI that the manager would accept using residual income.

"You should choose us because we can customize our products and services to meet your individual needs better than our competitors." is an example of A) Customer Intimacy B) Operational Excellence C) Product Leadership

A) Customer Intimacy

Select all that apply Choose the groups of performance measures typically used in the balanced scorecard approach. A) Customer B) Financial C) Learning and growth D) Safety records E) Quality scores

A) Customer; B) Financial; C) Learning and growth

Select all that apply Which of the following will ordinarily improve margin (and ROI)? A) Increasing selling prices B) Reducing operating expenses C) Reducing unit sales D) Reducing operating assets

A) Increasing selling prices; B) Reducing operating expenses

Select all that apply Valid criticisms of evaluating performance based on return on investment (ROI) include managers may _____. A) be put in charge of a business segment that includes committed costs over which a manager has no control B) take actions that increase ROI in the short-run at the expense of long-term performance C) affect ROI by increasing sales or decreasing operating expenses for their division D) reject investment opportunities that are profitable for the company but have a negative impact on a manager's ROI

A) be put in charge of a business segment that includes committed costs over which a manager has no control; B) take actions that increase ROI in the short-run at the expense of long-term performance; D) reject investment opportunities that are profitable for the company but have a negative impact on a manager's ROI

Select all that apply Disadvantages of decentralization include ______. A) clashing objectives between departments and the organization B) spreading innovative ideas may be difficult C) lack of coordination D) defining organization strategy is difficult

A) clashing objectives between departments and the organization; B) spreading innovative ideas may be difficult; C) lack of coordination

Select all that apply Disadvantages of decentralization include ______. A) clashing objectives between departments and the organization B) defining organization strategy is difficult C) lack of coordination D) spreading innovative ideas may be difficult

A) clashing objectives between departments and the organization; C) lack of coordination; D) spreading innovative ideas may be difficult

Select all that apply: The balanced scorecard framework ______. A) considers market performance as a financial measure B) holds organizations accountable for translating improvements in nonfinancial performance to financial results C) considers customer satisfaction to be a financial measure D) suggests that improving process-oriented measures automatically leads to financial success

A) considers market performance as a financial measure; B) holds organizations accountable for translating improvements in nonfinancial performance to financial results

Select all that apply Operating assets include ______. A) equipment B) land held for investment C) inventory D) accounts receivable E) investments in bonds

A) equipment; C) inventory; D) accounts receivable

Assembling products and handling baggage are examples of ______ processes. A) internal business B) financial C) learning and growth D) customer

A) internal business

When managers are evaluated on residual income, rather than on return on investment (ROI), they will be ______ likely to pursue projects that will benefit the entire company. A) more B) equally C) less

A) more

Select all that apply ROI can be calculated as ______. A) net operating income ÷ average operating assets B) average operating assets ÷ net operating income C) margin × turnover D) margin ÷ turnover

A) net operating income ÷ average operating assets; C) margin × turnover

Select all that apply: Which of the following statements are true regarding corporate social responsibility and the balanced scorecard? A) While these measures are important, they should not be tied to managers evaluations and rewards. B) Average compensation for female employees ÷ average compensation for male employees is a learning and growth measure. C) A company should always connect its measures using if-then hypothesis statements.

B) Average compensation for female employees ÷ average compensation for male employees is a learning and growth measure.; C) A company should always connect its measures using if-then hypothesis statements.

Choose the four groups of performance measures typically used in the balanced scorecard approach. A) Financial, internal business processes, learning and growth, and quality assurance B) Financial, customer, internal business processes, and learning and growth C) Financial, customer, learning and growth, and quality assurance D) Financial, customer, internal business processes, and quality assurance

B) Financial, customer, internal business processes, and learning and growth

Select all that apply Which of the following statements are true? A) In order for employees to understand the importance of the balanced scorecard, incentive compensation should immediately be tied to it. B) It is important that balanced scorecard measures are not easily manipulated. C) Using balanced scorecard performance measures to reward employees can result in sub-optimal results.

B) It is important that balanced scorecard measures are not easily manipulated.; C) Using balanced scorecard performance measures to reward employees can result in sub-optimal results.

"You should choose us because we deliver products and services faster, more conveniently, and at a lower price than our competitors." is an example of A) Customer Intimacy B) Operational Excellence C) Product Leadership

B) Operational Excellence

Which manager has control over both costs and revenue, but not over decisions regarding major purchases and expansions? A) Investment center B) Profit center C) Cost center

B) Profit center

Net operating income ÷ Average operating assets = ______. A) Margin B) Return on investment C) Turnover D) Residual income

B) Return on investment

Select all that apply: Which of the following are dimensions of learning and growth measures? A) Agility B) Skills development C) Lean resource management D) Wellness/Safety E) Compensation and advancement

B) Skills development; D) Wellness/Safety; E) Compensation and advancement

Using net book value (instead of gross cost) to calculate average operating assets ______. A) encourages new investment B) increases ROI over time C) has no effect on ROI

B) increases ROI over time

ROI is a method used to evaluate ______. A) cost and profit centers, but not investment centers B) investment centers, but not cost or profit centers C) cost, profit, and investment centers D) profit and investment centers, but not cost centers

B) investment centers, but not cost or profit centers

Compensation should _______. A) be tied to balanced scorecard measures immediately so that managers understand its importance B) only be tied to balanced scorecard measures after the organization has been successfully managed with it for some time C) not be tied to scorecard measures because managers will be tempted to make decisions that do not benefit the overall company

B) only be tied to balanced scorecard measures after the organization has been successfully managed with it for some time

Select all that apply: The "triple-bottom line" refers to ______. A) promotion B) planet C) profit D) people

B) planet; C) profit; D) people

A "game plan" that enables a company to attract customers by distinguishing itself from competitors is a ______. A) customer value proposition B) strategy C) balanced scorecard D) vision

B) strategy

If a balanced scorecard is well constructed, ______. A) each performance measure should stand on its own and be tied to a specific objective B) the performance measures should link together on a cause-and-effect basis C) the most important indicators will be tied to financial performance

B) the performance measures should link together on a cause-and-effect basis

Managers of cost centers are evaluated on ______ in their responsibility center. A) revenues and costs incurred B) their ability to control costs C) revenues, costs and the use of investment funds

B) their ability to control costs

Select all that apply In a decentralized organization ______. A) decision-making authority is reserved for top management so lower level managers can concentrate on operations. B) top management can concentrate on issues such as overall strategy C) lower-level managers are trained for higher positions. D) changes in the operating environment can be responded to rapidly E) lower-level managers have low motivation and job satisfaction due to increased responsibility

B) top management can concentrate on issues such as overall strategy; C) lower-level managers are trained for higher positions.; D) changes in the operating environment can be responded to rapidly

An integrated set of performance measures that are derived from the company's strategy is a(n) _______ __________

Balanced scorecard

Residual income = ______. A) Net operating income (NOI) ÷ Average operating assets B) NOI ÷ Sales C) NOI - (Average operating assets × Minimum rate of return) D) Margin × Turnover

C) NOI - (Average operating assets × Minimum rate of return)

"You should choose us because we offer more innovative and higher quality products than our competitors." is an example of A) Customer Intimacy B) Operational Excellence C) Product Leadership

C) Product Leadership

Which of the following statements is not a weakness of using return on investment (ROI) to evaluate performance? A) Managers may increase ROI in a way that is inconsistent with company strategy. B) It may be difficult to assess the performance of a manager who takes over an existing business segment. C) ROI does not include the investment in nonoperating assets, such as land held for investment or stock in other companies. D) Managers may reject investment opportunities that would benefit the entire company but negatively affect the manager.

C) ROI does not include the investment in nonoperating assets, such as land held for investment or stock in other companies.

An integrated set of performance measures that are derived from the company's strategy is ______. A) return on investment B) the minimum required rate of return C) a balanced scorecard D) residual income

C) a balanced scorecard

A series of steps that are followed in order to carry out some task in an organization is called a(n) ______. A) resource management task B) innovation C) business process D) performance measure

C) business process

What the company does in an attempt to satisfy customers falls into the ______ group of the balance scorecard. A) learning and growth B) customer C) internal business processes D) financial

C) internal business processes

Measures included in internal business processes ______ in nature. A) are generally only financial B) are generally only nonfinancial C) may be financial or nonfinancial

C) may be financial or nonfinancial

In decentralized organizations, decision-making authority is ______. A) confined to a few top executives B) not granted to the lowest level managers C) spread throughout the organization

C) spread throughout the organization

Operations are able to respond quickly to customers and changes in the environment in a decentralized organization because ______. A) lower-level managers are judged on non financial measures rather than financial outcomes of their decisions B) top management is heavily involved in the day-to-day operations C) there are fewer managers that must be consulted before a decision is made

C) there are fewer managers that must be consulted before a decision is made

Which of the following statements is incorrect regarding responsibility accounting? A) Responsibility accounting links lower-level managers' decisions with the outcomes of those decisions. B) Responsibility accounting divides the organization into "responsibility centers" to evaluate managers' decisions. C) Responsibility accounting holds managers accountable for the revenues and expenses over which they have control. D) Responsibility accounting refers to the process of evaluating top management on the decisions made by lower-level managers.

D) Responsibility accounting refers to the process of evaluating top management on the decisions made by lower-level managers.

True or False: True or false: Corporate social responsibility focuses on legal compliance only.

False: CSR extends beyond legal compliance to include voluntary actions that satisfy stakeholder expectations.

True or false: Adams, Inc. has found that their managers are reluctant to replace old equipment with new, updated equipment. To stop this practice, Adams should compute ROI using assets' net book values.

False: Net book value discourages equipment replacement.

True or False: A company's strategy has an important influence on the categories it will include on its balanced scorecard.

False: Strategy has an important influence on the measures included in each category, not the categories themselves.

Measures related to trend and market performance are included in the _________ section of the balanced scorecard.

Financial/Finance

A leading organization in the field of social and environmental performance measurement is the ________ ___________ Initiative.

Global Reporting

Because companies target different customers with different kinds of products and services, performance measures should be tailored to the specific ________ of a company.

Strategy/Strategies

An advantage of using a(n) __________ ___________ is that it continually tests the theories underlying management strategies.

balanced scorecard

In order to improve financial results, the four categories of measures in the __________ __________ must be linked together in a cause-and-effect fashion.

balanced scorecard

Measures related to innovation and time are included in the internal _________ _________ section of the balanced scorecard.

business processes

Measures related to satisfaction, lifetime value and loyalty are included in the ________ section of the balanced scorecard

customer

An organization in which decision-making authority is spread throughout the organization is ______.

decentralized

Net operating income is income before _________ and ________.

interest; taxes

The manager of a(n) ________ center has control over costs, revenue, and investments in operating assets.

investment

Measures related to recruiting and retention are included in the ___________ and _______ section of the balanced scorecard.

learning; growth