CC 10
CC 10
CC 10
Consistency between goals of the firm and the goals of its employees is:
A. goal optimization C. goal congruence
B. goal conformance D. goal compensation
35. When a manager takes an action that benefits his or her responsibility center, but not the company as a whole,
A. it is a non-controllable action
B. there is a lack of goal congruence
C. the center must be an artificial profit center
D. the manager should be fired
Suboptimization
19. A management decision may be beneficial for a given profit center, but not for the entire company. From the
overall company viewpoint, this decision would lead to
A. goal congruence C. centralization
B. suboptimization D. maximization
Management by objectives
17. An emphasis on obtaining goal congruence is consistent with a broad managerial approach called
A. management by crisis
B. management by objectives
C. management through goal congruence
D. just-in-time philosophy
38. In a responsibility accounting system, the process in which a supervisor and a subordinate jointly determine the
subordinate’s goals and plans for achieving these goals is
A. Top-down budgeting C. Bottom-up budgeting
B. Imposed budgeting D. Management by objectives
Responsibility Accounting
5. Responsibility accounting is a system whose attributes include
A. responsibility, liability, and culpability
B. liability, accountability, and performance evaluation
C. performance evaluation, accountability, and responsibility
D. culpability, liability, and accountability
9. What term identifies an accounting system in which the operations of the business are broken down into reportable
segments and the control functions of a foreperson, sales managers, or supervisor is emphasized?
A. Responsibility accounting C. Operations-research accounting
B. Control accounting D. Budgetary accounting
10. The Atwood Company uses a performance reporting system that reflects the company’s decentralization of decision
making. The departmental performance report shows one line of data for each subordinate who reports to the group
vice-president. The data presented shows the actual costs incurred during the period, the budgeted costs, and all
variances from budget for that subordinate’s department. The Atwood Company is using a type of system called
A. Flexible budgeting C. Responsibility accounting
B. Contribution budgeting D. Cost-benefit accounting
14. The accumulation of accounting data on the basis of the individual manager who has the authority to make day-to-
day decisions about activities in an area is called
A. static reporting. C. responsibility accounting.
B. flexible accounting. D. master budgeting.
36. Which of the following is critically important for a responsibility accounting system to be effective?
A. Each employee should receive a separate performance report.
B. Service department costs should be allocated to the operating departments that use the service.
C. Each manager should know the criteria used for evaluating his or her performance.
D. The details on the performance reports for individual managers should add up to the totals on the report to their
supervisor.
Responsibility report
13. The report to a territorial sales manager which shows the contribution to profit by each salesperson in the territory is
called
A. a profit reportA. C. an absorption profit report
B. a responsibility report D. a distribution report
Responsibility centers
15. A responsibility center
A. is an organization unit where management control exists over incurring costs or generating revenue
B. is responsible for all other departments
C. has a responsible manager in charge of it
D. all of the above
Activity center
32. A segment of an organization for which management wants to report the cost of the activities performed separately is
called a(n)
A. cost center C. activity-based costing center
B. activity center D. batch activity center
Cost center
20. The sequence that reflects increasing breadth of responsibility is
A. cost center, investment center, profit center
B. cost center, profit center, investment center
C. profit center, cost center, investment center
D. investment center, cost center, profit center
Profit center
21. A profit center is
A. a responsibility center that always reports a profit.
B. a responsibility center that incurs costs and generates revenues.
C. evaluated by the rate of return earned on the investment allocated to the center.
D. referred to as a loss center when operations do not meet the company's objectives.
Investment center
24. A distinguishing characteristic of an investment center is that
A. revenues are generated by selling and buying stocks and bonds.
B. interest revenue is the major source of revenues.
C. the profitability of the center is related to the funds invested in the center.
D. it is a responsibility center which only generates revenues.
Comprehensive
25. In which type of responsibility center is the manager held accountable for its profits?
A. Cost center C. Investment center
B. Profit center D. Profit centers or Investment centers
26. Which of the following responsibility centers have managers who are held accountable for costs?
A. Cost centers and Investment centers
B. Revenue centers and Profit centers
C. Revenue centers and Investment centers
D. Cost centers and Profit centers
Controllable costs
29. Controllable costs are costs that
A. fluctuate in total in response to small changes in the rate of capacity utilization.
B. will be unaffected by current managerial decisions.
C. management decides to incur in the current period to enable the company to achieve objectives other than filling
customers’ orders.
D. are likely to respond to the amount of attention devoted to them by a specified manager.
23. Overtime conditions and pay were recently set by the personnel department. The production department has just
received a request for a rush order from the sales department. The production department protests that additional
overtime costs would be incurred as a result of the order. The sales department argues the order is from an
important customer. The production department processes the order. In order to control costs, which department
should be charged with the overtime costs generated as a result of the rush order?
A. Personnel department
B. Production department
C. Sales department
D. Shared by production department and sales department
34. Which one of the following would NOT usually be considered a controllable cost for the product or division manager?
A. factory wages C. maintenance
B. plant salaries D. plant rent expense
Profitability accounting
28. Micro Manufacturing uses an accounting system that charges costs to the manager who has been delegated the
authority to make the decisions incurring the costs. For example, if the sales manager accepts a rush order that
requires the incurrence of additional manufacturing costs, these additional costs are charged to the sales manager
because the authority to accept or decline the rush order was given to the sales manager. This type of accounting
system is known as
A. Functional accounting C. Contribution accounting
B. Reciprocal allocation D. Profitability accounting
Budgeting system