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Chapter 08 - Performance Management and Evaluation
Student: ___________________________________________________________________________
1. The balanced scorecard links the perspectives of an organization's stakeholders with the organization's
mission and vision, performance measures, strategic plan, and resources.
True False
2. An organization's four basic stakeholder groups include investors, employees, external business processes,
and customers.
True False
3. To succeed, an organization must add value for all of its stakeholders in the long term only.
True False
4. The alignment of an organization's strategy with all the perspectives of the balanced scorecard results in
performance objectives that benefit all stakeholders.
True False
5. It is not necessary for managers to fully understand the causal relationship between their actions and the
organization's overall performance to get results.
True False
6. A performance management and evaluation system is mainly utilized to account for and report on financial
performance.
True False
7. A performance management and evaluation system allows a company to identify how well it is doing, where
it is going, and what improvements will make it more profitable.
True False
8. What is being measured by managers is the same as the actual measures used to monitor performance.
True False
9. Performance measurement is the use of both quantitative and qualitative tools to gauge an organization's
performance in relation to a specific goal or an expected outcome.
True False
10. Most organizations use very similar performance measures in their day-to-day business operations.
True False
11. When developing performance measures, management must consider a number of different issues besides
what to measure and how to measure.
True False
12. Managers at all levels are evaluated in terms of their ability to manage their areas of responsibility in
keeping with organizational goals.
True False
13. Responsibility accounting is more concerned with performance evaluation than performance management.
True False
14. Manufacturing companies rarely utilize responsibility accounting.

True False
15. A responsibility center whose manager is held accountable for both revenues and costs and for the resulting
operating income is called a profit center.
True False
16. An organization chart assists in management control.

True False
17. A report for a responsibility center includes costs and revenues that are both controllable and uncontrollable
by a manager.
True False
18. Performance reports allow comparisons between actual performance and budget expectations.
True False
19. If a performance report contains items that are out of a manager's control, the entire responsibility
accounting system can be called into question.
True False
20. Both flexible budgeting and variable costing can be utilized to evaluate cost center performance.
True False
21. A flexible budget is derived by multiplying actual unit output by the standard unit costs.
True False
22. Variable costing is a method of reporting that deals only with a manager's controllable, variable costs.
True False
23. A variable costing income statement is essentially the same as a traditional income statement.
True False
24. In evaluating investment center performance, ROI proves to be such a comprehensive performance measure
that other performance measures are rarely needed.
True False
25. Residual income is the amount of profit left after subtracting expenses of a particular investment center.
True False
26. When calculating ROI, assets invested represent the average of the beginning and ending asset balances for
a given period.
True False
27. ROI is a performance measure mainly connected with a company's income statement.
True False
28. Like ROI, residual income is a performance measure displayed as a ratio.

True False
29. For residual income figures to be comparable on a companywide basis, all investment centers must have
equal access to resources and similar asset investment bases.
True False
30. ROI, residual income, and economic value added all represent performance measures that can be utilized to
determine investment center performance.
True False
31. Economic value added is synonymous with shareholder wealth created by an investment center.
True False
32. Cost of capital is the maximum desired rate of return on a particular investment.
True False
33. The equation for economic value added includes pretax operating income as well as current liabilities.
True False
34. A manager can improve the economic value of an investment center by decreasing assets.
True False
35. The economic value added performance measure focuses on long-term financial performance.
True False
36. How effective a performance management and evaluation system is depends on how well the goals of the
entire company are coordinated rather than on how well the goals of individual responsibility centers and
managers are coordinated.
True False
37. The logical linking of goals to measurable objectives and targets and the tying of appropriate compensation
incentives to the achievement of such objectives and targets are critical to the successful coordination of goals.
True False
38. Tying compensation incentives to performance targets decreases the likelihood that the goals of
responsibility centers, managers, and the entire organization will be well coordinated.
True False
39. Employer-provided health insurance is a common type of incentive compensation.

True False
40. Incentive awards are utilized mainly to encourage long-term performance.

True False
41. The causal links between an organization's goals, objectives, measures, performance targets need not be
apparent.
True False
42. The balanced scorecard was developed by

A. Robert S. Kaplan.
B. David R. Norton.
C. David R. Norton and Robert S. Princeton.
D. Robert S. Kaplan and David R. Norton.
43. Which of the following represents a basic stakeholder of an organization?
A. The account receivable clerk of the organization
B. A vice president of the organization
C. A line supervisor of the organization
D. All of these choices
44. By balancing all stakeholders' needs, managers are more likely to achieve their objectives in
A. the long term.
B. the short term.
C. the short term as well as the long term.
D. all areas of the organization.
45. One of the overall goals of the Pancake House Restaurant is customer satisfaction. In the light of that goal,
match the learning and growth perspective with the appropriate objective.
A. Customer satisfaction means that the chefs engage in culinary continuing education.
B. Customer satisfaction means that customers receive their food within 10 minutes of placing an order.
C. Customer satisfaction means that the customer appreciation program is successful.
D. Customer satisfaction means that the restaurant is profitable.
match the internal business processes perspective with the appropriate objective.
A. goals and vision, performance goals, strategic plan, and financial resources.
B. mission and overall plan, performance measures, departmental plans, and resources.
C. mission and vision, performance measures, strategic plan, and resources.
D. mission and vision, performance goals, overall plan, and resources.
48. A performance management and evaluation system is a set of procedures that account for and report on
A. qualitative performance.
B. quantitative performance.
C. employee performance.
D. quantitative and qualitative performance.
49. The use of quantitative tools to gauge an organization's performance in relation to a specific goal or an
expected outcome is known as
A. responsibility accounting.
B. an asset turnover.
C. a performance management and evaluation system.
D. a performance measurement.
50. Which of the following is an example of a performance measurement?

A. Product quality
B. Number of customer complaints
C. Customer satisfaction
51. In developing performance measures, management must consider which of the following?
A. How should we measure?
B. How can managers monitor financial performance?
C. What should we measure?
52. A performance management and evaluation system is utilized so that a company can identify which of the
following?
A. How well it is doing and where it is going
B. How satisfied investors are with their return on investment
C. How satisfied both customers and employees are
D. How well it is doing, where it is going, and what improvements will bring in more profit
53. The manager of Center A is responsible for generating cash inflows and incurring costs with the goal of
making money for the company. The manager has no responsibility for assets. What type of responsibility
center is Center A?
A. Cost center
B. Discretionary cost center
C. Profit center
D. Revenue center
54. The manager of Center B produces a product that is not sold to an external party. What type of
responsibility center is Center B?
A. Cost center
C. Profit center
D. Revenue center
55. The manager of Center C is responsible for the online order operations of a large retailer. What type of
responsibility center is Center C?
A. Discretionary cost center
B. Profit center
C. Revenue center
D. Investment center
56. The manager of Center D designs, produces, and sells products to external parties. The manager makes both
long-term and short-term decisions. What type of responsibility center is Center D?
A. Cost center
B. Profit center
C. Revenue center
57. The manager of Center E provides human resource support for the other centers in the company. What type
of responsibility center is Center E?
A. Cost center
C. Revenue center
58. Many organizations utilize responsibility accounting

A. to assist in building performance measures for the organization.
B. to assist in performance management and evaluation.
C. solely to evaluate how well employees are handling their responsibilities.
D. as an alternative to generally accepted accounting principles.
59. How many different types of responsibility centers exist?

A. 2
B. 5
C. 10
D. 3
60. The way in which the performance of a cost center is evaluated is similar to
A. job order costing.
B. standard costing.
C. process costing.
D. none of these choices.
61. A responsibility center in which the relationship between resources and products or services produced is not
well defined is known as a(n)
A. investment center.
B. profit center.
C. cost center.
D. discretionary cost center.
62. A good example of a profit center would be

A. a car manufacturer's assembly line.
B. a local Home Depot store.
C. Avis Car Rental's national reservation center.
D. a manufacturer's human resources department.
63. A responsibility accounting system ensures that

A. generally accepted accounting principles reporting requirements are met.
B. managers will not be held responsible for items they cannot change.
C. 99 percent of businesses utilizing such a system will be profitable.
D. easy correlations between revenues and costs can be drawn.
64. Performance reports should include

A. controllable costs and revenues for a specific responsibility center.
B. all costs, revenues, and resources for a specific responsibility center.
C. controllable costs for a specific responsibility center.
D. controllable costs, revenues, and resources for a specific responsibility center.
65. Standard costing would most often require which type of performance evaluation?
A. Flexible budgeting
B. Zero-based budgeting
C. Variable costing
D. Any of these choices
66. Variable costing allows a manager to classify controllable costs as
A. either variable or fixed.
B. variable only.
C. fixed only.
D. either short-term variable or long-term variable.
67. A variable costing income statement is the same as

A. a contribution margin income statement.
B. a traditional income statement.
C. a cost-volume-profit income statement.
68. Variable costing is utilized to evaluate the performance of

A. investment centers.
B. revenue centers.
C. discretionary cost centers.
D. profit centers.
69. How is the contribution margin calculated when utilizing variable costing?
A. Sales less variable cost of goods sold
B. Sales less variable cost of goods sold, less variable selling and administrative expenses
C. Sales less cost of goods sold
D. Sales less variable cost of goods sold, less variable selling and administrative expenses, less fixed cost of
goods sold, less fixed selling and administrative expenses
70. Dana Klammer is the manager of the Cutting Department in the Northwest Division of Steel Products.
Which of the following costs is a controllable cost?
A. Salaries of cutting machine workers
B. Cost of electricity for the Northwest Division
C. Lumber Department hauling costs
D. Vice president's salary
71. Use the following performance report for a cost center of the Dry Cat Food Division for the month ended
December 31 to answer the question below.
Actual Results Flexible Master

Variance Budget Variance Budget
Units produced 70 0 ? 30 (U) 100
Center costs
Direct materials $ 84 $ ? $ 70 $ ? $100
Direct labor 150 ? ? 60 (F) 200
Variable overhead ? 20 (U) 210 ? 300
Fixed overhead 280 ? 250 ? 250
Total cost $ ? $74 (U) $ ? $255 (F) $850
Performance measures
Defect-free units to total 80% ? N/A N/A 90%
produced
Average throughput 12 minutes ? N/A N/A 10 minutes
time per unit
The flexible budget is based on how many units produced?

A. 0 units
B. 30 units
C. 70 units
D. 100 units

Center costs
Direct labor 150 ? ? 60 (F) 200
Total cost $ ? $74 (U) $ ? $255 (F) $850
produced
time per unit
What is the direct materials variance between the actual results and the flexible budget?
A. $14 (U)
B. $14 (F)
C. $30 (U)
D. $30 (F)

Center costs
Direct labor 150 ? ? 60 (F) 200
Total cost $ ? $74 (U) $ ? $255 (F) $850
produced
time per unit
What is the actual total cost?

A. $521
B. $595
C. $744
D. $1,031

Center costs
Direct labor 150 ? ? 60 (F) 200
Total cost $ ? $74 (U) $ ? $255 (F) $850
produced
time per unit
What is the direct labor variance between the actual results and the flexible budget?
A. $10 (U)
B. $10 (F)
C. $60 (U)
D. $60 (F)
75. Use the following performance report for a profit center of the Wet Cat Food Company for the month ended
Actual Master
Results Variance Budget
Sales $ ? $20 (F) $ 200
Controllable variable costs
Variable cost of goods sold $ 125 $10 (U) $ ?
Variable selling and administrative expenses 15 ? 5
Contribution margin $ 80 $ ? $ 80
Controllable fixed costs ? 10 (F) 60
Profit center income $ ? $10 (F) $ ?
Number of orders processed 50 20 (F) ?
Average daily sales $? 0.66 (F) $4.00
Number of units sold 100 40 (F) ?
What were the actual sales?

A. $180
B. $200
C. $220
D. $240
Actual Master
Sales $ ? $20 (F) $ 200
What was the actual profit center income?

A. $10
B. $20
C. $30
D. $40
77. Chow Company has a number of investment centers to track on a day-to-day basis. The following represent
key figures related to one of Chow's investment centers for May 20xx:
Operating income $ 6,000,000

Sales 15,000,000
Asset turnover 55%
What is the investment center's ROI for May 20xx (rounded to two decimal places)?
A. 27.5 percent
B. 33 percent
C. 55 percent
D. 22 percent
78. Which of the following represents the number of sales dollars generated by each dollar invested in assets?
A. Asset turnover
B. Assets invested
C. Profit margin
D. Operating income
79. A manager can improve ROI by doing which of the following?

A. Decreasing assets
B. Increasing sales
C. Decreasing costs
80. Determine the October 20xx ROI (rounded to two decimal places) for an investment center with the
following information:
Assets at September 30, 20xx $20,000,000

Assets at October 31, 20xx 22,000,000
Operating income for the month ended October 31, 20xx 5,000,000.0
A. 25.8 percent
B. 21.8 percent
C. 23.8 percent
D. 27.8 percent
81. Determine the February 20xx residual income for an investment center with the following information:
Operating income for the month ended February 28, 20xx $2,900,000
Desired ROI 52%
Actual ROI 38%
Assets invested $18,200,000
A. ($4,016,000)
B. ($5,836,000)
C. ($6,564,000)
D. ($8,384,000)
82. Determine the April 20xx residual income for an investment center with the following information:
Operating income for the month ended April 30, 20xx $14,900,000
Assets at March 31, 20xx 10,200,000
Assets at April 30, 20xx 13,150,000
Desired ROI 49%
Actual ROI 60%
A. $8,456,500
B. $8,780,000
C. $9,179,250
D. $8,945,750
83. For purposes of computing EVA, the minimum desired rate or return on an investment is known as
A. ROI.
B. cost of capital.
C. residual income.
D. profit margin.
84. Compute the May 20xx EVA for an investment center with the following information:
Pre-tax operating income for May 20xx $18,000,500

Income tax expense for May 20xx 5,100,000
Assets at May 31, 20xx 13,200,500
Current liabilities at May 31, 20xx 10,000,000
Long-term liabilities at May 31, 20xx 3,500,000
Minimum desired rate of return 20%
A. $12,260,400
B. $12,700,500
C. $11,880,500
D. $12,200,500
85. An evaluation of EVA will prove more meaningful if it is compared to

A. target EVAs.
B. EVAs from other investment centers.
C. EVAs from previous periods.
D. all of these choices.
86. A manager can improve EVA by

A. increasing assets and decreasing costs.
B. increasing sales and assets.
C. increasing cost of capital and assets.
D. decreasing assets and lowering cost of capital.
87. Which of the following performance measures is most concerned with long-term financial performance?
A. Economic value added
B. Residual income
C. ROI
D. None of these choices
88. Compute the June 20xx cost of capital (rounded to nearest percent) for an investment center with the
Pre-tax operating income for June 20xx $17,500,000

Assets at June 30, 20xx 6,200,000
Current liabilities at June 30, 20xx 4,000,000
Long-term liabilities at June 30, 20xx 1,500,000
Income tax expense for June 30, 20xx 5,000,000
EVA 11,940,000
A. 10 percent
B. 25 percent
C. 13 percent
D. 17 percent
89. Compute the return on investment (rounded to nearest percent) for the Tim Tom investment center as shown
below.
Tim Tom Subsidiary

Total sales $1,600
Operating income $180
Average assets invested $900
Profit margin ?
Asset turnover ?
ROI ?
A. 20%
B. 17%
C. 14%
D. 11%
90. Compute the profit margin (rounded to nearest percent) for the Tim Tom investment center as shown below.
Tim Tom Subsidiary

Total sales $1,600
Profit margin ?
Asset turnover ?
ROI ?
A. 7%
B. 9%
C. 12%
D. 18%
91. Compute the asset turnover (rounded to two decimal places) for the Tim Tom investment center as shown
below.
Tim Tom Subsidiary

Total sales $1,600
Profit margin ?
Asset turnover ?
ROI ?
A. 1.78
B. 0.56
C. 0.11
D. 9.00
92. Compute the residual income for the Hi Ho investment center as shown below.
Hi Ho Subsidiary
Total sales $20,000
Operating income $4,300
Beginning assets invested $14,000
Ending assets invested $16,000
Average assets invested $?
Desired ROI 25%
Residual income $?
A. $550
B. $3,050
C. $4,300
D. $1,800
93. Compute the average assets invested for the Hi Ho investment center as shown below.
Hi Ho Subsidiary
Total sales $20,000
Desired ROI 25%
Residual income $?
A. $14,400
B. $14,450
C. $14,350
D. $14,300
94. Compute the current liabilities for the Yi Yo investment center as shown below.
Yi Yo Subsidiary
Total sales $18,000
After-tax operating income $1,000
Total assets $15,000
Current liabilities $?
Total assets – current liabilities $3,500
Cost of capital 15%
Economic value added $?
A. $475
B. $525
C. $1,000
D. $11,500
95. The effectiveness of a performance management and evaluation system depends on how well it coordinates
the goals of
A. the entire company.
B. responsibility centers.
C. managers.
96. Which of the following is a type of incentive compensation?

A. Health insurance
B. Profit-sharing plans
C. Pension plans
D. Flexible spending programs
97. Awards are often used to encourage

A. intermediate performance.
B. short-term performance.
C. long-term performance.
D. both short-term and long-term performance.
98. What type of incentive compensation is utilized to motivate employees to achieve financial targets that
increase the company's stock price?
A. Profit-sharing plans
B. Awards
C. Cash bonuses
D. Stock option programs
99. Why might stock options not be the best way to promote coordination of goals?
A. Stock prices can fluctuate quickly.
B. Many of the variables that affect stock prices are beyond a manager's control.
C. Employees generally do not value stock options very highly.
100. Incentive plans must be developed with input from which of the following groups?
A. Supervisory employees
B. Production line employees
C. All employees
D. Human resources employees
101. What is the business purpose of the balanced scorecard, and how does it benefit an organization?
102. Why are managers more likely to achieve their objectives in both the short term and the long term when
they utilize a tool such as the balanced scorecard?
103. Provide three examples of something that an organization might want to measure and a performance
measurement that could be utilized in each example.
104. Identify and describe the five different responsibility centers, and provide one example of each.
105. Why is it important that a manager's evaluation be based only on those revenues and costs that he or she
can control?
106. Identify the following and show the formula for calculating each:
a. ROI
b. RI
c. EVA
107. What are some of the limitations of utilizing ROI, residual income, and EVA to measure the performance
of investment centers?
108. What are some items that can affect an investment center's EVA calculation, and how can EVA be
improved?
109. The CEO of Buckstars is interested in reviewing the May 20xx performance report for Cost Center 7-11.
Prepare a brief performance report for the CEO utilizing the following information for Cost Center 7-11. Line
items should be broken out between direct materials, direct labor, variable overhead, and fixed overhead.
Flexible Budget Master Budget

Actual Results
Ground coffee $1,350 $1,200 $1,270

Flavored syrups 2,300 2,320 3,000
Milk 850 800 950
Servers' wages 3,500 3,800 3,600
Supervisor's salary 5,000 5,000 5,000
Espresso machine repair 50 120 150
110. Using the following information, prepare a traditional income statement and a variable costing income
statement:
Sales $4,000,000
Variable cost of goods sold 1,800,000
Variable selling expenses 900,000
Fixed selling expenses 100,000
Fixed manufacturing costs 600,000
111. Using the following information, prepare a single report setting forth the variable costing income statement
as well as a performance report for Profit Center West.
Budgeted sales $20,000

Budgeted sales variance $5,000 (F)
Actual variable cost of goods sold $8,000
Actual variable cost of goods sold variance $10,000 (F)
Budgeted variable selling expenses $5,000
Actual variable selling expenses $3,000
Budgeted fixed manufacturing costs $1,000
Budgeted fixed manufacturing costs variance $50 (F)
Budgeted fixed selling expenses $2,000
Budgeted fixed selling expenses variance $100 (F)
Actual number of orders processed 100
Actual number of orders processed variance 10 (U)
Budgeted average daily sales $500
Budgeted average daily sales variance $200 (F)
Actual number of units sold 450
Actual number of units sold variance 25 (F)
112. As the staff accountant for Investment Center 713, calculate the October 20xx ROI, using the following
information:
October 20xx profit margin 38%

October 20xx sales $2,000,000
Assets at September 30, 20xx 1,850,000
113. As the staff accountant for Investment Centers Beta and Gamma, compute the residual income for each
investment center, using the following information:
Beta Gamma
Operating income $850,000 $1,000,000
Actual ROI 28% 49%
Desired ROI 32% 35%
Assets invested $585,000 $750,000
114. Kristen Roper oversees her company's largest and most profitable investment center. She has asked you, as
her staff accountant, to compute the center's ROI, residual income, and EVA for the month of August 20xx,
using the following information (rounded to two decimal places):
August 20xx operating income $300,000

August 20xx sales 450,000
Assets at July 31, 20xx 500,000
Assets at August 31, 20xx 510,000
August 20x6 income taxes 90,000
Current liabilities at August 31, 20xx 250,000
Cost of capital 19%
Desired ROI 52%
115. Complete the following calculations for the three investment centers shown (round to two decimal places):
Investment Center 1
Operating income $3,000,000

Assets invested a
Performance indicator 25%
Investment Center 2

Desired ROI b
Assets invested 4,000,000
Performance indicator 20,000
Investment Center 3
After-tax operating income c

Cost of capital 38%
Current liabilities 150,000
2) For each Investment Center, identify which performance indicator is used.
116. Calculate ROI, residual income, and EVA for each of the investment centers listed. (Round to two decimal
places.)
Investment Center 1 Investment Center 2

Operating income $ 50,000 $ 70,000
Assets invested 125,000 180,000
Income taxes 15,000 21,000
Cost of capital in dollars 13,000 25,000
Desired ROI 56% 48%
117. As the staff accountant for NYC Investment Center #1, compute the center's EVA, using the following
information:
Pretax Operating income $ 900,000

Income taxes 270,000
Total assets 1,500,000
Total liabilities 1,000,000
Long-term liabilities 100,000
Cost of capital 55%
Chapter 08 - Performance Management and Evaluation Key
mission and vision, performance measures, strategic plan, and resources.
TRUE
2. An organization's four basic stakeholder groups include investors, employees, external business processes,
and customers.
FALSE
3. To succeed, an organization must add value for all of its stakeholders in the long term only.
FALSE
4. The alignment of an organization's strategy with all the perspectives of the balanced scorecard results in
performance objectives that benefit all stakeholders.
TRUE
5. It is not necessary for managers to fully understand the causal relationship between their actions and the
organization's overall performance to get results.
FALSE
6. A performance management and evaluation system is mainly utilized to account for and report on financial
performance.
FALSE
7. A performance management and evaluation system allows a company to identify how well it is doing, where
it is going, and what improvements will make it more profitable.
TRUE
8. What is being measured by managers is the same as the actual measures used to monitor performance.
FALSE
9. Performance measurement is the use of both quantitative and qualitative tools to gauge an organization's
performance in relation to a specific goal or an expected outcome.
FALSE
10. Most organizations use very similar performance measures in their day-to-day business operations.
FALSE
11. When developing performance measures, management must consider a number of different issues besides
what to measure and how to measure.
TRUE
12. Managers at all levels are evaluated in terms of their ability to manage their areas of responsibility in
keeping with organizational goals.
TRUE
13. Responsibility accounting is more concerned with performance evaluation than performance management.
FALSE
14. Manufacturing companies rarely utilize responsibility accounting.

FALSE
15. A responsibility center whose manager is held accountable for both revenues and costs and for the resulting
operating income is called a profit center.
TRUE
16. An organization chart assists in management control.

TRUE
17. A report for a responsibility center includes costs and revenues that are both controllable and uncontrollable
by a manager.
FALSE
18. Performance reports allow comparisons between actual performance and budget expectations.
TRUE
19. If a performance report contains items that are out of a manager's control, the entire responsibility
accounting system can be called into question.
TRUE
20. Both flexible budgeting and variable costing can be utilized to evaluate cost center performance.
FALSE
21. A flexible budget is derived by multiplying actual unit output by the standard unit costs.
TRUE
22. Variable costing is a method of reporting that deals only with a manager's controllable, variable costs.
FALSE
23. A variable costing income statement is essentially the same as a traditional income statement.
FALSE
24. In evaluating investment center performance, ROI proves to be such a comprehensive performance measure
that other performance measures are rarely needed.
FALSE
25. Residual income is the amount of profit left after subtracting expenses of a particular investment center.
FALSE
26. When calculating ROI, assets invested represent the average of the beginning and ending asset balances for
a given period.
TRUE
27. ROI is a performance measure mainly connected with a company's income statement.
FALSE
28. Like ROI, residual income is a performance measure displayed as a ratio.

FALSE
29. For residual income figures to be comparable on a companywide basis, all investment centers must have
equal access to resources and similar asset investment bases.
TRUE
30. ROI, residual income, and economic value added all represent performance measures that can be utilized to
determine investment center performance.
TRUE
31. Economic value added is synonymous with shareholder wealth created by an investment center.
TRUE
32. Cost of capital is the maximum desired rate of return on a particular investment.
FALSE
33. The equation for economic value added includes pretax operating income as well as current liabilities.
FALSE
34. A manager can improve the economic value of an investment center by decreasing assets.
TRUE
35. The economic value added performance measure focuses on long-term financial performance.
FALSE
36. How effective a performance management and evaluation system is depends on how well the goals of the
entire company are coordinated rather than on how well the goals of individual responsibility centers and
managers are coordinated.
FALSE
37. The logical linking of goals to measurable objectives and targets and the tying of appropriate compensation
incentives to the achievement of such objectives and targets are critical to the successful coordination of goals.
TRUE
38. Tying compensation incentives to performance targets decreases the likelihood that the goals of
responsibility centers, managers, and the entire organization will be well coordinated.
FALSE
39. Employer-provided health insurance is a common type of incentive compensation.

FALSE
40. Incentive awards are utilized mainly to encourage long-term performance.

FALSE
41. The causal links between an organization's goals, objectives, measures, performance targets need not be
apparent.
FALSE
42. The balanced scorecard was developed by

A. Robert S. Kaplan.
B. David R. Norton.
C. David R. Norton and Robert S. Princeton.
D. Robert S. Kaplan and David R. Norton.
43. Which of the following represents a basic stakeholder of an organization?
A. The account receivable clerk of the organization
B. A vice president of the organization
C. A line supervisor of the organization
44. By balancing all stakeholders' needs, managers are more likely to achieve their objectives in
A. the long term.
B. the short term.
C. the short term as well as the long term.
D. all areas of the organization.
match the learning and growth perspective with the appropriate objective.
match the internal business processes perspective with the appropriate objective.
A. goals and vision, performance goals, strategic plan, and financial resources.
B. mission and overall plan, performance measures, departmental plans, and resources.
C. mission and vision, performance measures, strategic plan, and resources.
D. mission and vision, performance goals, overall plan, and resources.
48. A performance management and evaluation system is a set of procedures that account for and report on
A. qualitative performance.
B. quantitative performance.
C. employee performance.
D. quantitative and qualitative performance.
49. The use of quantitative tools to gauge an organization's performance in relation to a specific goal or an
expected outcome is known as
A. responsibility accounting.
B. an asset turnover.
C. a performance management and evaluation system.
D. a performance measurement.
50. Which of the following is an example of a performance measurement?

A. Product quality
B. Number of customer complaints
C. Customer satisfaction
51. In developing performance measures, management must consider which of the following?
A. How should we measure?
B. How can managers monitor financial performance?
C. What should we measure?
52. A performance management and evaluation system is utilized so that a company can identify which of the
following?
A. How well it is doing and where it is going
B. How satisfied investors are with their return on investment
C. How satisfied both customers and employees are
D. How well it is doing, where it is going, and what improvements will bring in more profit
53. The manager of Center A is responsible for generating cash inflows and incurring costs with the goal of
making money for the company. The manager has no responsibility for assets. What type of responsibility
center is Center A?
A. Cost center
C. Profit center
D. Revenue center
54. The manager of Center B produces a product that is not sold to an external party. What type of
responsibility center is Center B?
A. Cost center
C. Profit center
D. Revenue center
55. The manager of Center C is responsible for the online order operations of a large retailer. What type of
responsibility center is Center C?
A. Discretionary cost center
B. Profit center
C. Revenue center
56. The manager of Center D designs, produces, and sells products to external parties. The manager makes both
long-term and short-term decisions. What type of responsibility center is Center D?
A. Cost center
B. Profit center
C. Revenue center
57. The manager of Center E provides human resource support for the other centers in the company. What type
of responsibility center is Center E?
A. Cost center
C. Revenue center
58. Many organizations utilize responsibility accounting

A. to assist in building performance measures for the organization.
B. to assist in performance management and evaluation.
C. solely to evaluate how well employees are handling their responsibilities.
D. as an alternative to generally accepted accounting principles.
59. How many different types of responsibility centers exist?

A. 2
B. 5
C. 10
D. 3
60. The way in which the performance of a cost center is evaluated is similar to
A. job order costing.
B. standard costing.
C. process costing.
61. A responsibility center in which the relationship between resources and products or services produced is not
well defined is known as a(n)
A. investment center.
B. profit center.
C. cost center.
D. discretionary cost center.
62. A good example of a profit center would be

A. a car manufacturer's assembly line.
B. a local Home Depot store.
C. Avis Car Rental's national reservation center.
D. a manufacturer's human resources department.
63. A responsibility accounting system ensures that

A. generally accepted accounting principles reporting requirements are met.
B. managers will not be held responsible for items they cannot change.
C. 99 percent of businesses utilizing such a system will be profitable.
D. easy correlations between revenues and costs can be drawn.
64. Performance reports should include

A. controllable costs and revenues for a specific responsibility center.
B. all costs, revenues, and resources for a specific responsibility center.
C. controllable costs for a specific responsibility center.
D. controllable costs, revenues, and resources for a specific responsibility center.
65. Standard costing would most often require which type of performance evaluation?
A. Flexible budgeting
B. Zero-based budgeting
C. Variable costing
D. Any of these choices
66. Variable costing allows a manager to classify controllable costs as
A. either variable or fixed.
B. variable only.
C. fixed only.
D. either short-term variable or long-term variable.
67. A variable costing income statement is the same as

A. a contribution margin income statement.
B. a traditional income statement.
C. a cost-volume-profit income statement.
68. Variable costing is utilized to evaluate the performance of

A. investment centers.
B. revenue centers.
C. discretionary cost centers.
D. profit centers.
69. How is the contribution margin calculated when utilizing variable costing?
A. Sales less variable cost of goods sold
B. Sales less variable cost of goods sold, less variable selling and administrative expenses
C. Sales less cost of goods sold
D. Sales less variable cost of goods sold, less variable selling and administrative expenses, less fixed cost of
goods sold, less fixed selling and administrative expenses
70. Dana Klammer is the manager of the Cutting Department in the Northwest Division of Steel Products.
Which of the following costs is a controllable cost?
A. Salaries of cutting machine workers
B. Cost of electricity for the Northwest Division
C. Lumber Department hauling costs
D. Vice president's salary

Center costs
Direct labor 150 ? ? 60 (F) 200
Total cost $ ? $74 (U) $ ? $255 (F) $850
produced
time per unit
The flexible budget is based on how many units produced?

A. 0 units
B. 30 units
C. 70 units
D. 100 units

Center costs
Direct labor 150 ? ? 60 (F) 200
Total cost $ ? $74 (U) $ ? $255 (F) $850
produced
time per unit
What is the direct materials variance between the actual results and the flexible budget?
A. $14 (U)
B. $14 (F)
C. $30 (U)
D. $30 (F)

Center costs
Direct labor 150 ? ? 60 (F) 200
Total cost $ ? $74 (U) $ ? $255 (F) $850
produced
time per unit
What is the actual total cost?

A. $521
B. $595
C. $744
D. $1,031

Center costs
Direct labor 150 ? ? 60 (F) 200
Total cost $ ? $74 (U) $ ? $255 (F) $850
produced
time per unit
What is the direct labor variance between the actual results and the flexible budget?
A. $10 (U)
B. $10 (F)
C. $60 (U)
D. $60 (F)
Actual Master
Sales $ ? $20 (F) $ 200
What were the actual sales?

A. $180
B. $200
C. $220
D. $240
Actual Master
Sales $ ? $20 (F) $ 200
What was the actual profit center income?

A. $10
B. $20
C. $30
D. $40
77. Chow Company has a number of investment centers to track on a day-to-day basis. The following represent
key figures related to one of Chow's investment centers for May 20xx:
Operating income $ 6,000,000

Sales 15,000,000
Asset turnover 55%
What is the investment center's ROI for May 20xx (rounded to two decimal places)?
A. 27.5 percent
B. 33 percent
C. 55 percent
D. 22 percent
78. Which of the following represents the number of sales dollars generated by each dollar invested in assets?
A. Asset turnover
B. Assets invested
C. Profit margin
D. Operating income
79. A manager can improve ROI by doing which of the following?

A. Decreasing assets
B. Increasing sales
C. Decreasing costs
80. Determine the October 20xx ROI (rounded to two decimal places) for an investment center with the
Assets at September 30, 20xx $20,000,000

A. 25.8 percent
B. 21.8 percent
C. 23.8 percent
D. 27.8 percent
81. Determine the February 20xx residual income for an investment center with the following information:
Operating income for the month ended February 28, 20xx $2,900,000
Desired ROI 52%
Actual ROI 38%
Assets invested $18,200,000
A. ($4,016,000)
B. ($5,836,000)
C. ($6,564,000)
D. ($8,384,000)
82. Determine the April 20xx residual income for an investment center with the following information:
Operating income for the month ended April 30, 20xx $14,900,000
Assets at March 31, 20xx 10,200,000
Assets at April 30, 20xx 13,150,000
Desired ROI 49%
Actual ROI 60%
A. $8,456,500
B. $8,780,000
C. $9,179,250
D. $8,945,750
83. For purposes of computing EVA, the minimum desired rate or return on an investment is known as
A. ROI.
B. cost of capital.
C. residual income.
D. profit margin.
84. Compute the May 20xx EVA for an investment center with the following information:
Pre-tax operating income for May 20xx $18,000,500

Income tax expense for May 20xx 5,100,000
Assets at May 31, 20xx 13,200,500
Current liabilities at May 31, 20xx 10,000,000
Long-term liabilities at May 31, 20xx 3,500,000
A. $12,260,400
B. $12,700,500
C. $11,880,500
D. $12,200,500
85. An evaluation of EVA will prove more meaningful if it is compared to

A. target EVAs.
B. EVAs from other investment centers.
C. EVAs from previous periods.
86. A manager can improve EVA by

A. increasing assets and decreasing costs.
B. increasing sales and assets.
C. increasing cost of capital and assets.
D. decreasing assets and lowering cost of capital.
87. Which of the following performance measures is most concerned with long-term financial performance?
A. Economic value added
B. Residual income
C. ROI
88. Compute the June 20xx cost of capital (rounded to nearest percent) for an investment center with the
Pre-tax operating income for June 20xx $17,500,000

Assets at June 30, 20xx 6,200,000
Current liabilities at June 30, 20xx 4,000,000
Long-term liabilities at June 30, 20xx 1,500,000
Income tax expense for June 30, 20xx 5,000,000
EVA 11,940,000
A. 10 percent
B. 25 percent
C. 13 percent
D. 17 percent
89. Compute the return on investment (rounded to nearest percent) for the Tim Tom investment center as shown
below.
Tim Tom Subsidiary

Total sales $1,600
Profit margin ?
Asset turnover ?
ROI ?
A. 20%
B. 17%
C. 14%
D. 11%
90. Compute the profit margin (rounded to nearest percent) for the Tim Tom investment center as shown below.
Tim Tom Subsidiary

Total sales $1,600
Profit margin ?
Asset turnover ?
ROI ?
A. 7%
B. 9%
C. 12%
D. 18%
91. Compute the asset turnover (rounded to two decimal places) for the Tim Tom investment center as shown
below.
Tim Tom Subsidiary

Total sales $1,600
Profit margin ?
Asset turnover ?
ROI ?
A. 1.78
B. 0.56
C. 0.11
D. 9.00
92. Compute the residual income for the Hi Ho investment center as shown below.
Hi Ho Subsidiary
Total sales $20,000
Desired ROI 25%
Residual income $?
A. $550
B. $3,050
C. $4,300
D. $1,800
93. Compute the average assets invested for the Hi Ho investment center as shown below.
Hi Ho Subsidiary
Total sales $20,000
Desired ROI 25%
Residual income $?
A. $14,400
B. $14,450
C. $14,350
D. $14,300
94. Compute the current liabilities for the Yi Yo investment center as shown below.
Yi Yo Subsidiary
Total sales $18,000
After-tax operating income $1,000
Current liabilities $?
Total assets – current liabilities $3,500
Cost of capital 15%
Economic value added $?
A. $475
B. $525
C. $1,000
D. $11,500
95. The effectiveness of a performance management and evaluation system depends on how well it coordinates
the goals of
A. the entire company.
B. responsibility centers.
C. managers.
96. Which of the following is a type of incentive compensation?

A. Health insurance
B. Profit-sharing plans
C. Pension plans
D. Flexible spending programs
97. Awards are often used to encourage

A. intermediate performance.
B. short-term performance.
C. long-term performance.
D. both short-term and long-term performance.
98. What type of incentive compensation is utilized to motivate employees to achieve financial targets that
increase the company's stock price?
A. Profit-sharing plans
B. Awards
C. Cash bonuses
D. Stock option programs
99. Why might stock options not be the best way to promote coordination of goals?
A. Stock prices can fluctuate quickly.
B. Many of the variables that affect stock prices are beyond a manager's control.
C. Employees generally do not value stock options very highly.
100. Incentive plans must be developed with input from which of the following groups?
A. Supervisory employees
B. Production line employees
C. All employees
D. Human resources employees
101. What is the business purpose of the balanced scorecard, and how does it benefit an organization?
The purpose of the balanced scorecard is to link the perspectives of an organization's four basic stakeholder
groups (financial [investors], learning and growth [employees], internal business processes, and customers) with
the organization's mission and vision, performance measures, strategic plan, and resources. The balanced
scorecard allows an organization to determine each of the stakeholders' objectives in order to translate them into
performance measures that have specific, quantifiable performance targets. Thus, managers should be able to
see how their actions contribute to the achievement of organizational goals and to understand how their
compensation is related to their actions.
102. Why are managers more likely to achieve their objectives in both the short term and the long term when
they utilize a tool such as the balanced scorecard?
Managers are more likely to achieve their objectives in both the short term and the long term when they utilize a
tool such as the balanced scorecard because they are balancing the needs of all stakeholders. Stakeholders
include investors (i.e., financial), employees (i.e., learning and growth), internal business processes, and
customers.
103. Provide three examples of something that an organization might want to measure and a performance
measurement that could be utilized in each example.
Answers will vary. The following are three examples.
What to Measure Performance Measurement

1. Service quality Number of customer complaints
2. Expenditures on a monthly basis Monthly expenditure budgets
3. Effectiveness of new computerized assembly line Monthly number of defective products produced
104. Identify and describe the five different responsibility centers, and provide one example of each.
Cost Center: A responsibility center whose manager is accountable only for controllable costs that have
well-defined relationships between the center's resources and products or services. Example: Ford Motor
Company's Detroit assembly line
Discretionary Cost Center: A responsibility center whose manager is accountable for costs only and in which
the relationship between resources and products or services produced is not well defined. Example: The Human
Resources Department of Merck & Co.
Revenue Center: A responsibility center whose manager is accountable primarily for revenue and whose
success is based on its ability to generate revenue. Example: Avis Car Rental's national reservation center
Profit Center: A responsibility center whose manager is accountable for both revenues and costs and for the
resulting operating income. Example: The local Wal-Mart store
Investment Center: A responsibility center whose manager is accountable for profit generation and who can also
make significant decisions about the resources the center uses. Example: The president of General Motors (The
“company” is the investment center, and the president is the “manager.”)
105. Why is it important that a manager's evaluation be based only on those revenues and costs that he or she
can control?
It is important that a manager's evaluation be based only on those revenues and costs that he or she can control
because a manager's compensation is usually tied directly to his or her performance. If an event uncontrollable
by a manager occurs and negatively impacts revenues and/or costs within the manager's area of responsibility,
an otherwise competent manager may appear incompetent and, therefore, not receive the compensation that he
or she rightfully deserves. This type of action adversely affects employee morale and, therefore, the
organization as a whole.
106. Identify the following and show the formula for calculating each:
a. ROI
b. RI
c. EVA
a. ROI = Return on Investment

Formula:
ROI = Operating Income  Assets Invested or Profit Margin ´ Asset Turnover or
(Operating Income  Sales) ´ (Sales  Assets Invested)
b. RI = Residual Income
Formula:
RI = Operating Income – (Desired ROI ´ Assets Invested)
c. EVA = Economic Value Added
Formula
EVA = After-Tax Operating Income – Cost of Capital in Dollars or After-Tax Operating Income – [Cost of
Capital ´ (Total Assets – Current Liabilities)]
107. What are some of the limitations of utilizing ROI, residual income, and EVA to measure the performance
of investment centers?
All three measure focus on short-term financial performance. In addition:
ROI: A company's overemphasis on ROI may cause managers to react with business decisions that favor their
particular area of responsibility's ROI performance at the expense of companywide profits or the long-term
success of other investment centers.
Residual Income: For residual income figures to be comparable, all investment centers must have equal access
to resources and similar asset investment bases.
EVA: Many factors affect EVA. Therefore, EVA evaluation will be more meaningful if the current EVA is
compared to EVAs from previous periods, target EVAs, and EVAs from other investment centers.
108. What are some items that can affect an investment center's EVA calculation, and how can EVA be
improved?
Some items that can affect an investment center's EVA calculation include managers' decisions regarding
pricing, product sales volume, income taxes, the cost of capital, and capital investments, among other financial
decisions. EVA can be improved by increasing sales, decreasing costs, decreasing assets, or decreasing the cost
of capital.
109. The CEO of Buckstars is interested in reviewing the May 20xx performance report for Cost Center 7-11.
Prepare a brief performance report for the CEO utilizing the following information for Cost Center 7-11. Line
items should be broken out between direct materials, direct labor, variable overhead, and fixed overhead.
Flexible Budget Master Budget

Actual Results
Ground coffee $1,350 $1,200 $1,270

Flavored syrups 2,300 2,320 3,000
Milk 850 800 950
Servers' wages 3,500 3,800 3,600
Supervisor's salary 5,000 5,000 5,000
Espresso machine repair 50 120 150
Actual Results Flexible Master Budget

Variance Budget Variance
Direct materials $ 4,500 $180 (U) $ 4,320 $900 (F) $ 5,220
Direct labor 3,500 300 (F) 3,800 200 (U) 3,600
Variable overhead 50 70 (F) 120 30 (F) 150
Fixed overhead 5,000 ____ -- 5,000 ____ -- 5,000
Total cost $13,050 $190 (F) $13,240 $730 (F) $13,970
110. Using the following information, prepare a traditional income statement and a variable costing income
statement:
Sales $4,000,000
Traditional Income Statement

Sales $4,000,000
Cost of goods sold 2,400,000
Gross margin $1,600,000
Operating income $ 600,000
Variable Costing Income Statement
Sales $4,000,000
Contribution margin $1,300,000
Operating income $ 600,000
111. Using the following information, prepare a single report setting forth the variable costing income statement
as well as a performance report for Profit Center West.
Budgeted sales $20,000

Budgeted sales variance $5,000 (F)
Actual variable cost of goods sold $8,000
Actual variable cost of goods sold variance $10,000 (F)
Budgeted variable selling expenses $5,000
Actual variable selling expenses $3,000
Budgeted fixed manufacturing costs $1,000
Budgeted fixed manufacturing costs variance $50 (F)
Budgeted fixed selling expenses $2,000
Budgeted fixed selling expenses variance $100 (F)
Actual number of orders processed 100
Actual number of orders processed variance 10 (U)
Budgeted average daily sales $500
Budgeted average daily sales variance $200 (F)
Actual number of units sold 450
Actual number of units sold variance 25 (F)
Master Budget Actual Results Variance

Sales $ 20,000 $25,000 $ 5,000 (F)
Variable cost of goods sold 18,000 8,000 10,000 (F)
Variable selling expenses 5,000 3,000 2,000 (F)
Contribution margin ($ 3,000) $14,000 $17,000 (F)
Fixed manufacturing costs 1,000 950 50 (F)
Fixed selling expense 2,000 1,900 100 (F)
Profit center income ($ 6,000) $11,150 $17,150 (F)
Number of orders processed 110 100 10 (U)

Daily sales $500 $700 $200 (F)
Number of units sold 425 450 25 (F)
112. As the staff accountant for Investment Center 713, calculate the October 20xx ROI, using the following
information:
October 20xx profit margin 38%

October 20xx sales $2,000,000
Assets at September 30, 20xx 1,850,000
Assets Invested = ($1,855,000 + $1,850,000)  2 = $1,852,500
Asset Turnover = $2,000,000  $1,852,500 = 1.08
ROI = 38% ´ 1.08 = 41.0%
113. As the staff accountant for Investment Centers Beta and Gamma, compute the residual income for each
investment center, using the following information:
Beta Gamma
Operating income $850,000 $1,000,000
Actual ROI 28% 49%
Desired ROI 32% 35%
Assets invested $585,000 $750,000
Investment Center Beta: $850,000 – (32% ´ $585,000) = $662,800

Investment Center Gamma: $1,000,000 – (35% ´ $750,000) = $737,500
114. Kristen Roper oversees her company's largest and most profitable investment center. She has asked you, as
her staff accountant, to compute the center's ROI, residual income, and EVA for the month of August 20xx,
using the following information (rounded to two decimal places):
August 20xx operating income $300,000

August 20xx sales 450,000
Assets at July 31, 20xx 500,000
Assets at August 31, 20xx 510,000
August 20x6 income taxes 90,000
Current liabilities at August 31, 20xx 250,000
Cost of capital 19%
Desired ROI 52%
Assets Invested = ($510,000 + $500,000)  2 = $505,000

ROI = $300,000  $505,000 = 59%
Residual Income = $300,000 – (52% ´ $505,000) = $37,400
After-Tax Operating Income = $300,000 – $90,000 = $210,000
EVA = $210,000 – [19% ´ ($510,000 – $250,000)] = $160,600
115. Complete the following calculations for the three investment centers shown (round to two decimal places):
Investment Center 1

Assets invested a
Performance indicator 25%
Investment Center 2

Desired ROI b
Assets invested 4,000,000
Investment Center 3
After-tax operating income c

Cost of capital 38%
Current liabilities 150,000
2) For each Investment Center, identify which performance indicator is used.
1.
a. $3,000,000  25% = $12,000,000
b. $3,500,000 – ($4,000,000x) = $20,000
x = 87%
c. x – [38% ´ ($500,000 – $150,000)] = $15,000
x = $148,000
Investment Center 1: Asset turnover
Investment Center 2: Residual income
Investment Center 3: Economic value added
116. Calculate ROI, residual income, and EVA for each of the investment centers listed. (Round to two decimal
places.)
Investment Center 1 Investment Center 2

Operating income $ 50,000 $ 70,000
Assets invested 125,000 180,000
Income taxes 15,000 21,000
Cost of capital in dollars 13,000 25,000
Desired ROI 56% 48%
Investment Center 1:
ROI = $50,000  $125,000 = 40%
Residual Income = $50,000 – (56% ´ $125,000) = ($20,000)
EVA = $50,000 – $15,000 – $13,000 = $22,000
Investment Center 2:
ROI = $70,000  $180,000 = 39%
Residual Income = $70,000 – (48% ´ $180,000) = ($16,400)
EVA = $70,000 – $21,000 – $25,000 = $24,000
117. As the staff accountant for NYC Investment Center #1, compute the center's EVA, using the following
information:
Pretax Operating income $ 900,000

Income taxes 270,000
Total assets 1,500,000
Total liabilities 1,000,000
Long-term liabilities 100,000
Cost of capital 55%
EVA = ($900,000 – $270,000) –[55% ´ ($1,500,000 – $900,000)] = $300,000

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They were alarmed by the stopping of communication with the colony
and went back in a tank-truck to find out what had happened, and
only the fact that they were unarmed saved them. They found
sphexes prowling and caterwauling about the fallen colony, in
numbers they still did not wholly believe. And the sphexes smelled
men inside the armored vehicle, but couldn't break in. In turn, the
men couldn't kill them, or they'd have been trailed to the mine and
besieged there for as long as they could kill an occasional monster.
The survivors stopped all mining—of course—and tried to use
remote-controlled robots for revenge and to get supplies for them.
Their mining-robots were not designed for either task. And they had
no weapons. They improvised miniature throwers of burning rocket-
fuel, and they sent occasional prowling sphexes away screaming with
scorched hides. But this was useful only because it did not kill the
beasts. And it cost fuel. In the end they barricaded themselves and
used the fuel only to keep a spark-signal going against the day when
another ship came to seek the colony. They stayed in the mine as in
a prison, on short rations, waiting without real hope. For diversion
they could only contemplate the mining-robots they could not spare
fuel to run and which could not do anything but mine.
When Huyghens and Roane reached them, they wept. They hated
robots and all things robotic only a little less than they hated sphexes.
But Huyghens explained, and armed them with weapons from the
packs of the bears, and they marched to the dead colony with the
male Kodiaks as point and advance-guard, and with Faro Nell
bringing up the rear. They killed sixteen sphexes on the way. In the
now overgrown clearing there were four more. In the shelters of the
colony they found only foulness and the fragments of what had been
men. But there was some food—not much, because the sphexes
clawed at anything that smelled of men, and had ruined the plastic
packets of radiation-sterilized food. But there were some supplies in
metal containers which were not destroyed.
And there was fuel, which men could dispense when they got to the
control-panels of the equipment. There were robots everywhere,
bright and shining and ready for operation, but immobile, with plants
growing up around and over them.
They ignored those robots. But lustfully they fueled tracked flame-
casters—adapting them to human rather than robot operation—and
the giant soil-sterilizer which had been built to destroy vegetation that
robots could not be made to weed out or cultivate. And they headed
back for the Sere Plateau, burning-eyed and filled with hate.
But Nugget became a badly spoiled bear-cub, because the freed men
approved passionately of anything that would even grow up to kill
sphexes. They petted him to excess, when they camped.
And they reached the plateau by a sphex-trail to the top. And Semper
scouted for sphexes, and the giant Kodiaks disturbed them and the
sphexes came squalling and spitting to destroy them—and while
Roane and Huyghens fired steadily, the great machines swept up
with their special weapons. The Earth-sterilizer, it was found, was
deadly against animal life as well as seeds, when its diathermic beam
was raised and aimed. But it had to be handled by a man. No robot
could decide just when it was to be used, and against what target.
Presently the bears were not needed, because the scorched corpses
of sphexes drew live ones from all parts of the plateau even in the
absence of noticeable breezes. The official business of the sphexes
was presumably finished, but they came to caterwaul and seek
vengeance—which they did not find. Presently the survivors of the
robot colony drove machines—as men needed to do, here—in great
circles around the hugest heap of slaughtered fiends, destroying new
arrivals as they came. It was such a killing as men had never before
made on any planet, but there would not be many left of the sphex-
horde which had bred in this particular patch of desert. There might
be other hordes elsewhere, and other breeding places, but the
normal territory of this mass of monsters would see few of them this
year.
Or next year, either. Because the soil-sterilizer would go over the dug-
up sand where the sphex-spawn lay hidden for the sun to hatch. And
the sun would never hatch them.
But Huyghens and Roane, by that time, were camped on the edge of
the plateau with the Kodiaks. They were technically upwind from the
scene of slaughter—and somehow it seemed more befitting for the
men of the robot colony to conduct it. After all, it was those men
whose companions had been killed.
There came an evening when Huyghens amiably cuffed Nugget away

from where he sniffed too urgently at a stag-steak cooking on the
campfire. Nugget ambled dolefully behind the protecting form of
Roane and sniveled.
"Huyghens," said Roane painfully, "we've got to come to a settlement
of our affairs. I'm a Colonial Survey officer. You're an illegal colonist.
It's my duty to arrest you."
Huyghens regarded him with interest.
"Will you offer me lenience if I tell on my confederates," he asked
mildly, "or may I plead that I can't be forced to testify against myself?"
Roane said vexedly:
"It's irritating! I've been an honest man all my life, but—I don't believe
in robots as I did, except in their place. And their place isn't here. Not
as the robot colony was planned, anyhow. The sphexes are nearly
wiped out, but they won't be extinct and robots can't handle them.
Bears and men will have to live here or—the people who do will have
to spend their lives behind sphex-proof fences, accepting only what
robots can give them. And there's much too much on this planet for
people to miss it! To live in a robot-managed controlled environment
on a planet like Loren Two wouldn't ... it wouldn't be self-respecting!"
"You wouldn't be getting religious, would you?" asked Huyghens
dryly. "That was your term for self-respect before."
Semper, the eagle, squawked indignantly as Sitka Pete almost
stepped on him, approaching the fire. Sitka Pete sniffed, and
Huyghens spoke to him sharply, and he sat down with a thump. He
remained sitting in an untidy lump, looking at the steak and drooling.
"You don't let me finish!" protested Roane querulously. "I'm a Colonial
Survey officer, and it's my job to pass on the work that's done on a
planet before any but the first-landed colonists may come there to
live. And of course to see that specifications are followed. Now—the
robot colony I was sent to survey was practically destroyed. As
designed, it wouldn't work. It couldn't survive."
Huyghens grunted. Night was falling. He turned the meat over the
fire.
"Now, in emergencies," said Roane carefully, "colonists have the right
to call on any passing ship for aid. Naturally! So—I've always been an
honest man before, Huyghens—my report will be that the colony as
designed was impractical, and that it was overwhelmed and
destroyed except for three survivors who holed up and signaled for
help. They did, you know!"
"Go on," grunted Huyghens.
"So," said Roane querulously, "it just happened—just happened, mind
you—that a ship with you and Sitka and Sourdough and Faro Nell on
board—and Nugget and Semper, too, of course—picked up the
distress-call. So you landed to help the colonists. And you did. That's
the story. Therefore it isn't illegal for you to be here. It was only illegal
for you to be here when you weren't needed. But we'll pretend you
weren't."
Huyghens glanced over his shoulder in the deepening night. He said
calmly:
"I wouldn't believe that if I told it myself. Do you think the Survey will?"
"They're not fools," said Roane tartly. "Of course they won't! But when
my report says that because of this unlikely series of events it is
practical to colonize the planet, whereas before it wasn't—and when
my report proves that a robot colony alone is stark nonsense, but that
with bears and men from your world added, so many thousand
colonists can be received per year—And when that much is true,
anyhow—"
Huyghens seemed to shake a little as a dark silhouette against the
flames. A little way off, Sourdough sniffed the air hopefully. With a
bright light like the fire, presently naked-looking flying things might
appear to be slapped down out of the air. They were succulent—to a
bear.
"My reports carry weight," insisted Roane. "The deal will be offered,
anyhow! The robot colony organizers will have to agree or they'll have
to fold up. It's true! And your people can hold them up for nearly what
terms they choose."
Huyghens' shaking became understandable. It was laughter.
"You're a lousy liar, Roane," he said, chuckling. "Isn't it unintelligent
and unreasonable and irrational to throw away a lifetime of honesty
just to get me out of a jam? You're not acting like a rational animal,
Roane. But I thought you wouldn't, when it came to the point."
Roane squirmed.
"That's the only solution I can think of. But it'll work."
"I accept it," said Huyghens, grinning. "With thanks. If only because it
means another few generations of men living like men on a planet
that is going to take a lot of taming. And—if you want to know—
because it keeps Sourdough and Sitka and Nell and Nugget from
being killed because I brought them here illegally."
Something pressed hard against Roane. Nugget, the cub, pushed
urgently against him in his desire to get closer to the fragrantly
cooking meat. He edged forward. Roane toppled from where he
squatted on the ground. He sprawled. Nugget sniffed luxuriously.
"Slap him," said Huyghens. "He'll move back."
"I won't!" said Roane indignantly from where he lay. "I won't do it! He's
my friend!"
THE END
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Managerial Accounting 9th Edition

Crosson Test Bank

Managerial Accounting 9th Edition Crosson Solutions

Managerial Accounting 10th Edition Crosson Test Bank

Financial And Managerial Accounting

Managerial Accounting 10th Edition Crosson Solutions

Fundamental Managerial Accounting Concepts 9th Edition

Financial and Managerial Accounting 9th Edition Needles

Managerial Accounting Canadian 9th Edition Garrison

Fundamental Managerial Accounting Concepts 9th Edition

14. Manufacturing companies rarely utilize responsibility accounting.

16. An organization chart assists in management control.

28. Like ROI, residual income is a performance measure displayed as a ratio.

39. Employer-provided health insurance is a common type of incentive compensation.

40. Incentive awards are utilized mainly to encourage long-term performance.

42. The balanced scorecard was developed by

50. Which of the following is an example of a performance measurement?

58. Many organizations utilize responsibility accounting

59. How many different types of responsibility centers exist?

62. A good example of a profit center would be

63. A responsibility accounting system ensures that

64. Performance reports should include

67. A variable costing income statement is the same as

68. Variable costing is utilized to evaluate the performance of

Actual Results Flexible Master

The flexible budget is based on how many units produced?

Actual Results Flexible Master

Actual Results Flexible Master

What is the actual total cost?

Actual Results Flexible Master

What were the actual sales?

What was the actual profit center income?

Operating income $ 6,000,000

79. A manager can improve ROI by doing which of the following?

Assets at September 30, 20xx $20,000,000

Pre-tax operating income for May 20xx $18,000,500

85. An evaluation of EVA will prove more meaningful if it is compared to

86. A manager can improve EVA by

Pre-tax operating income for June 20xx $17,500,000

Tim Tom Subsidiary

Tim Tom Subsidiary

Tim Tom Subsidiary

96. Which of the following is a type of incentive compensation?

97. Awards are often used to encourage

Flexible Budget Master Budget

Ground coffee $1,350 $1,200 $1,270

Budgeted sales $20,000

October 20xx profit margin 38%

August 20xx operating income $300,000

Operating income $3,000,000

Operating income $3,500,000

After-tax operating income c

2) For each Investment Center, identify which performance indicator is used.

Investment Center 1 Investment Center 2

Pretax Operating income $ 900,000

14. Manufacturing companies rarely utilize responsibility accounting.

16. An organization chart assists in management control.

28. Like ROI, residual income is a performance measure displayed as a ratio.