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Principles of Accounting, Volume 2: Managerial Accounting

Multiple Choice

Principles of Accounting, Volume 2: Managerial AccountingMultiple Choice
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1.

LO 12.1Components of the organization that are demotivating for purposes of performance management are known as ________.

  1. business goals
  2. strategic plans
  3. uncontrollable factors
  4. incentives
2.

LO 12.1When managerial accountants design an evaluation system that is based on criteria for which a manager is responsible, and it is structured to encourage managers to make decisions that will meet the goals of the company as well as their own personal job goals, the framework used is ________.

  1. a controllable factors framework
  2. an uncontrollable factors framework
  3. a strategic plan framework
  4. a responsibility accounting framework
3.

LO 12.1Goal congruence in well-designed performance measurement systems best explains a congruence between ________.

  1. employees and the company
  2. strategic plans and the future
  3. decisions and outcomes
  4. feedback and measurement
4.

LO 12.1Responsibility accounting holds managers responsible for ________.

  1. all costs charged to their subunit
  2. all costs charged to their subunit plus a share of company-wide fixed costs
  3. only the costs that they can control
  4. only the costs that they have personally approved
5.

LO 12.1Performance measures are only useful if ________.

  1. there are both controllable and uncontrollable factors to evaluate managers
  2. manager reward systems are designed by the chief financial officer prior to implementation
  3. all of the measures used are accounting numbers
  4. there is a baseline against which to compare the measured results
6.

LO 12.2Which of the following is not a characteristic of a good performance measurement system?

  1. timely
  2. consistent
  3. based on activities over which managers have no control or influence
  4. uses both long- and short-term performances and standards
7.

LO 12.2A good performance measurement system will align the goals of management with ________.

  1. the goals of the city manager and the mayoral staff
  2. the goals of the corporation, and both parties will benefit
  3. the priorities of the stockholders as listed at the annual meeting
  4. the investment department’s response to the annual audit
8.

LO 12.2What should an organization do if performance measures change?

  1. Make sure that the manager being evaluated is aware of the measurement change, as this may affect his or her decision-making.
  2. Make sure that the manager benefits without the corporation also benefitting.
  3. Make sure that there are significant overriding opportunities for each manager, if the manager is unaware of the change.
  4. Obtain customer surveys on the change before communicating the change to the manager.
9.

LO 12.2A good performance measurement system will include which of the following?

  1. short-term goals
  2. long-term goals
  3. short-term and long-term goals
  4. no goals at all
10.

LO 12.2Without proper performance measures, goal congruence is almost impossible to achieve and will likely lead to ________.

  1. more stable targets
  2. decreased defects
  3. lost profits and dissatisfied employees
  4. employees satisfied with the status quo
11.

LO 12.3Dixon Construction Materials has collected this information:

Cost of the machine $2,000,000. Income to be generated by the machine 1,000,000. Income without the new machine 7,000,000. Beginning of the year capital assets (without the machine) 12,000,000. End of the year capital assets (without the machine) 12,400,000. Tax rate 30 percent. Minimum required rate of return 15 percent. Weighted average cost of capital 9 percent. Sales revenue without the machine 18,000,000. Sales revenue with the machine 19,400,000.

Based on this information, what is the EVA for the project?

  1. $100,000
  2. $10,000
  3. $450,000
  4. ($110,000)
12.

LO 12.3The cost of equity is ________.

  1. the interest associated with debt
  2. the rate of return required by investors to incentivize them to invest in a company
  3. the weighted average cost of capital
  4. equal to the amount of asset turnover
13.

LO 12.3Which of the following measures the profitability of a division relative to the size of its investment in capital assets?

  1. residual income (RI)
  2. sales margin
  3. return on investment (ROI)
  4. economic value added (EVA)
14.

LO 12.3The capital structure of Ridley Enterprises is: Debt 40%, Equity 60%. The cost of debt is 13%, and the cost of equity is 16.5%. What is the weighted average cost of capital for Ridley Enterprises?

  1. 14.4%
  2. 15.1%
  3. 16.2%
  4. 13.8%
15.

LO 12.3Calculate the ROI for Gardner Chemical given the following information:

Income $6,000. Revenue $24,000. Average assets $10,000.
  1. 25%
  2. 24%
  3. 60%
  4. 40%
16.

LO 12.4Which of the following statements is false?

  1. The four dimensions of performance that are considered in a balanced scorecard are financial, customer, internal process, and learning and growth
  2. A balanced scorecard will include qualitative and quantitative measures.
  3. Stakeholders cannot include stockholders.
  4. A balanced scorecard is the compatibility between personal goals and the goals of the organization.
17.

LO 12.4The metrics based on nonfinancial information are known as ________.

  1. quantitative factors
  2. qualitative factors
  3. stakeholders
  4. stockholders
18.

LO 12.4The metrics based on financial numbers produced by the accounting system are ________.

  1. quantitative factors
  2. qualitative factors
  3. stakeholders
  4. stockholders
19.

LO 12.4People affected by decisions made by a company, including investors, creditors, employees, managers, regulators, customers, suppliers, and laypeople, are known as ________.

  1. quantitative factors
  2. qualitative factors
  3. stakeholders
  4. stockholders
20.

LO 12.4The owners of company stock are ________.

  1. quantitative factors
  2. qualitative factors
  3. stakeholders
  4. stockholders
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