Question

1.

The _____ perspective of the Balanced Scorecard management system describes the economic consequences of actions taken in the other three perspectives.

a.customer

b.internal

c.financial

d.learning and growth

2.

Which of the following is true of centralized decision making?

a.Managers at the lower level are not allowed to implement the decisions made.

b.Decisions are made at the very top level of management.

c.Managers at the lower level are allowed to make and implement key decisions.

d.Decision-making authority for a responsibility center is delegated to its lower level managers.

3.

Consider the following information for the manufacturing cell of Stripes Company:

Maximum units produced in a quarter	301,000 units
Actual units produced in a quarter	258,000 units
Productive hours in a quarter	43,000 hours

Compute the theoretical velocity and the actual velocity in units per hour.

a.Theoretical velocity is 6 units per hour, and actual velocity is 5 units per hour.

b.Theoretical velocity is 6 units per hour, and actual velocity is 7 units per hour.

c.Theoretical velocity is 7 units per hour, and actual velocity is 6 units per hour.

d.Theoretical velocity is 7 units per hour, and actual velocity is 5 units per hour.

4.

Which of the following is true of residual income?

a.If residual income is less than zero, then the division is earning more than the minimum required rate of return.

b.If residual income is less than zero, then the division is earning more than the market rate of return.

c.If residual income is less than zero, then the division is earning less than the minimum required rate of return.

d.If residual income is less than zero, then the division is earning less than the market rate of return.

5.

_____ is the difference between operating income and the minimum dollar return required on a company's operating assets.

a.Economic value added

b.Non-recurring income

c.Residual income

d.Minimum rate of return

6.

Which of the following statements is true of a negotiated transfer price?

a.A negotiated transfer price is useful in case an in-house division has to incur additional selling and distribution costs than external market participants.

b.A negotiated transfer price results from the negotiation between the selling department and the top management.

c.A negotiated transfer price results from the negotiation between the buying department and the top management.

d.A negotiated transfer price allows the selling and buying divisions to share any cost savings resulting from avoided costs.

7.

Which of the following is affected by the price charged for goods transferred between two divisions of a company that are both treated as responsibility centers?

a.Costs of the selling division alone

b.Market price of the product

c.Profits of both the selling and buying divisions

d.Demand for the product in the external market

Answer 1

1) The answer is Option C.

Financial is what describes the economic consequences of actions taken in the other three perspectives.

2) The answer is option B

In centralized decision making, it is the top level of management that will make all the decisions.

3) The answer is Option C.

theoretical velocity = 301000/43000hours = 7 units/hour

actual velocity = 258000/43000 hours = 6 units/hour

4) the answer is Option C.

Residual income is known as income generated more than the required rate of return. So if residual income is zero it means division is earning less than minimum required rate of return.

5) The answer is Option C

Residual income is the difference between operating income and the minimum dollar return required on a company's operating assets.

6) The answer is option D

A negotiated transfer price allows the selling and buying divisions to share any cost savings resulting from avoided costs. Hence it is beneficial for both.

7) The answer is option C

The price charged for the transfer of goods between two divisions of the company will affect the profits of both the buying the and sellling divisions. One's profit will increase whereas it will decrease for the other.

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