Chapter 10 Review: Performance Evaluation

Companies often decentralize their operations by:
Geographic area
Product line
Customer base
Which of the following is not an advantage of decentralization?

Use of expert knowledge

Achieving goal congruence

Improved customer relations

Frees top management’s time

Achieving goal congruence
In terms of responsibility centers, a large corporate division would be considered an:
Investment center
Which of the following is true?

Favorable variances should always be interpreted as “good news”” for the company.

Unfavorable variances should always be interpreted as “bad news” for the company.

Favorable variances are variances that cause operating income to be higher than budgeted.

Management by exception means that managers investigate all unfavorable variances but not all favorable variances.

Favorable variances are variances that cause operating income to be higher than budgeted.
A segment margin is the operating income generated by subtracting:
Only direct fixed expenses from a segment’s contribution margin.
Return on investment (ROI) can be restated as which of the following?

Residual income x Sales margin

Sales margin / Capital turnover

Residual income / Sales margin

Sales margin x Capital turnover

Sales margin x Capital turnover
Which of the following is not a valid strategy for determining a transfer price?

Using the price set by GAAP

Using the market price

Using negotiated price

Using some definition of cost

Using the price set by GAAP
Which of the following is false?

The difference between actual results and the master budget is called the master budget variance.

The volume variance is due to causes other than volume.

The flexible budget is prepared using the actual volume achieved during the period.

The master budget variance can be split into two components: a volume variance and a flexible budget variance.

The volume variance is due to causes other than volume.
“Number of new products developed” would be a key performance indicator (KPI) for which of the four balanced scorecard perspectives?
Internal business
“Hours of employee training” would be a key performance indicator (KPI) for which of the four balanced scorecard perspectives?
Learning and growth
​Sherwin-Williams Store​ #1933 is located in​ Copley, Ohio. The store sells​ paints, wallpapers, and supplies to​ do-it-yourself customers and to professional wall covering installers.
Profit
The Accounting Research and Compliance Department at FirstEnergy is responsible for researching how new accounting pronouncements and rules will impact​ FirstEnergy’s financial statements.
Cost
The Southwestern Sales Region of McDermott Foods is responsible for selling the various product lines of McDermott.
Revenue
The Taxation Department at Verizon​ Communications, Inc., is responsible for preparing the​ federal, state, and local income and franchise tax returns for the corporation.
Cost
The Roseville Chipotle restaurant in​ Minnesota, is owned by its parent Chipotle Mexican​ Grill, Inc. The Roseville​ Chipotle, like other Chipotle​ restaurants, serves​ burritos, fajitas, and tacos and competes in the​ “fast-casual” dining category.
Profit
Trek Bicycle Corporation manufactures and distributes bicycles and cycling products under the​ Trek, Gary​ Fisher, Bontrager, and Klein brand names.
Investment
The Hershey Company is one of the oldest chocolate companies in the United States. Its product lines include the Mauna Loa Macademia​ Nuts, Dagoba Organic​ Chocolates, and Joseph Schmidt Confections.
Investment
The Human Resources Department is responsible for recruiting and training for​ Kohl’s Corporation.
Cost
The reservation office for BlueSky​ Airlines, Inc., is responsible for both web sales and counter sales.
Revenue
The Disney Store at Spring Hill Mall in West​ Dundee, Illinois, is owned by The Walt Disney Company.
Profit
H​ & R Block Tax​ Services, H​ & R Block​ Bank, and McGladrey are all divisions of their parent​ corporation, H​ & R Block.
Investment