Question 1

(HT) The Asian Division of a multinational manufacturing organization would likely be

classified as a:
Response: profit center
Correct answer: investment center.
Score: 0 out of 1

Question 2
(HTi) Responsibility accounting always leads to positive behavior because of the
emphasis on finding individuals responsible for negative or less than optimum
performance.
Response: False
Feedback: Used inappropriately (finding blame), responsibility accounting can often
lead to negative behavior and an undermining of company goals. Used appropriately, it
can foster positive behavior and lead to goal congruence.
Correct answer: False
Score: 1 out of 1

Question 3
(HG) Which of the following is NOT a characteristic of a management control system?
Response: It encourages short-term profitability.
Correct answer: It encourages short-term profitability.
Score: 1 out of 1

Question 4
(HG) The manager of a hobby store that is part of a chain of stores is MOST likely
responsible for a(n):
Response: profit center
Correct answer: profit center
Score: 1 out of 1

Question 5
(LB) In responsibility accounting the most relevant classification of costs is
Response: fixed and variable.
Correct answer: controllable and noncontrollable.
Score: 0 out of 1

Question 6
(RB) 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
Response: suboptimization.
Correct answer: suboptimization.
Score: 1 out of 1

Question 7
(UNi) Which one of the following is NOT an outcome of adopting decentralization?
Response: It may eliminate goal congruence problems.
Feedback: Decentralization often creates goal congruence problems which occur when
subunit managers have goals that differ from those of upper level managers.
Correct answer: It may eliminate goal congruence problems.
Score: 1 out of 1

Question 8
(GN) Responsibility accounting functions most effectively in decentralized
organizations.
Response: True
Correct answer: True
Score: 1 out of 1

Question 9
(UNi) A difference between a cost center and a profit center is that a
Response: Cost center is not responsible for revenues.
Feedback: A cost center is responsible for only costs (expenses.) A profit center is
resonsible for costs and revenues.
Correct answer: Cost center is not responsible for revenues.
Score: 1 out of 1

Question 10
(LB) It is not always possible to separate the variable and fixed components of actual
costs.
Response: True
Correct answer: True
Score: 1 out of 1

Question 1
(UN) Decentralized firms can delegate authority and yet retain control and monitor
managers' performance by structuring the organization into responsibility centers.
Which one of the following organizational segments is most like an independent
business?
Response: investment center.

Question 2
(RB) Responsibility reports reflect the flow of information from operational units to top
management.
Response: True

Question 3
(LB) The criteria used for evaluating performance
Response: should be designed to help achieve goal congruence.

Question 4
(UNi) Which one of the following is a disadvantage of decentralization?
Response: There may be a duplication of activities.

Question 5
(HTi) When is goal congruence achieved?
Response: When managers of subunits throughout the organization strive to achieve
goals set up by top management

Question 6
(LB) Both ROI and RI can be used for performance evaluation of
Response: investment centers.

Question 7
(RB) The manager of a revenue center has the authority to establish selling prices of
product.

Response: False

Question 8
(LB) Which of the following is critically important for a responsibility accounting system
to be effective?
Response: Service department costs should be allocated to the operating departments
that use the service.

Question 9
(RB) Decentralization can result in a lack of goal congruence among departments.
Response: True

Question 10
(HG) Decentralization is often based on all of the following except
Response: business function.