Chapter 12 - Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Chapter 12
Responsibility Accounting, Operational Performance Measures, and the
Balanced Scorecard
Answer Key

True / False Questions

1. Each department, responsible for different processes, should have goals different from the
company as a whole.

FALSE

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 12-01
Feedback True: The managers of each department should ensure that the people their departments are striving toward the same overall
goals, or work toward goal congruence.
Feedback False: Correct! The managers of each department should ensure that the people their departments are striving toward the same
overall goals, or work toward goal congruence.

2. Responsibility accounting refers to the various concepts and tools used by managers to
measure the performance of people and departments in order to foster goal congruence.

TRUE

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 12-01
Feedback True: Correct! Responsibility accounting refers to the various concepts and tools used by managers to measure the performance of
people and departments in order to foster goal congruence.
Feedback False: Responsibility accounting refers to the various concepts and tools used by managers to measure the performance of people
and departments in order to foster goal congruence.

3. A cost center manager does not have the ability to produce revenue.

TRUE

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 12-02
Feedback True: Correct! A cost center manager does not have the ability to produce revenue.
Feedback False: A cost center manager does not have the ability to produce revenue.

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Chapter 12 - Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

4. A company-owned restaurant in a fast-food chain is considered an investment center.

FALSE

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 12-02
Feedback True: A company-owned restaurant in a fast-food chain is considered a profit center.
Feedback False: Correct! A company-owned restaurant in a fast-food chain is considered a profit center.

5. Performance reports help managers use management by exception and effectively control
operations.

TRUE

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-03
Feedback True: Correct! It is true that performance reports help managers use management by exception and effectively control operations.
Feedback False: It is true that performance reports help managers use management by exception and effectively control operations.

6. Performance reports are unique in that they do not incorporate budgets and variance
analysis.

FALSE

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-03
Feedback True: Actually, performance reports make heavy use of budgets and variance analysis.
Feedback False: Correct! Performance reports make heavy use of budgets and variance analysis.

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Chapter 12 - Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

7. An allocation base for a cost pool should ideally be a cost object.

FALSE

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-04
Feedback True: An allocation base for a cost pool should not be a cost object.
Feedback False: Correct! An allocation base for a cost pool should not be a cost object.

8. A collection of costs to be assigned is called a cost pool.

TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-04
Feedback True: Correct! It is true that cost pools are collections of costs to be assigned.
Feedback False: It is true that cost pools are collections of costs to be assigned.

9. Common costs are charged to a company's operating segments when preparing a segmented
income statement.

FALSE

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Decision Making
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-05
Feedback True: Common costs are not charged to a company’s operating segments when preparing a segmented income statement.
Feedback False: Correct! Common costs are not charged to a company’s operating segments when preparing a segmented income
statement.

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Chapter 12 - Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

10. Costs that are traceable to a segment and are completely beyond the influence of the
segment manager can be advantageously divided in segment reports into two distinct
responsibilities - those for segments and those for segment managers.

TRUE

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Decision Making
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-05
Feedback True: Correct! One advantage of segmented reports is that they make a distinction between segments and segment managers.
Feedback False: One advantage of segmented reports is that they make a distinction between segments and segment managers.

11. Inventory control is important in achieving the benefits of a just-in-time (JIT) philosophy.

TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Decision Making
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-06
Feedback True: Correct! Inventory control is critical for benefits of a JIT philosophy.
Feedback False: Inventory control is critical for benefits of a JIT philosophy.

12. The continual search for the most effective method of accomplishing a task by comparing
existing methods and performance levels with those of other organizations, or with other
subunits within the same organization is known as a gain-sharing plan.

FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Decision Making
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-06
Feedback True: This is the definition of benchmarking, not a gain-sharing plan.
Feedback False: Correct! This is the definition of benchmarking, not a gain-sharing plan.

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Chapter 12 - Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

13. The typical balanced scorecard is best described as containing both financial and
nonfinancial performance measures.

TRUE

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-07
Feedback True: Correct! The typical balanced scorecard is best described as containing both financial and nonfinancial performance
measures.
Feedback False: The typical balanced scorecard is best described as containing both financial and nonfinancial performance measures.

14. A company’s balanced scorecard should focus on the performance measurements that are
most important to its key competitor.

FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-07
Feedback True: A company’s balanced scorecard should measure the aspects of its performance that are most important for its success, not
its competitor’s success; although, the scorecard will probably take into account some of the competitor measures.
Feedback False: Correct! A company’s balanced scorecard should measure the aspects of its performance that are most important for its
success, not its competitor’s success; although, the scorecard will probably take into account some of the competitor measures.

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Chapter 12 - Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Multiple Choice Questions

15. When managers of subunits throughout an organization strive to achieve the goals set by
top management, the result is:
A. goal congruence.
B. planning and control.
C. responsibility accounting.
D. delegation of decision making.
E. strategic control.

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-01
Feedback A: Correct! This is the correct definition for goal congruence.
Feedback B: This term is incorrect.
Feedback C: This term is incorrect.
Feedback D: This term is incorrect.
Feedback E: This term is incorrect.

16. The concepts and tools used to measure the performance of people and departments are
known as:
A. goal congruence.
B. planning and control.
C. responsibility accounting.
D. delegation of decision making.
E. strategic control.

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-01
Feedback A: This term is incorrect.
Feedback B: This term is incorrect.
Feedback C: Correct! This is the definition for responsibility accounting.
Feedback D: This term is incorrect.
Feedback E: This term is incorrect.

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Chapter 12 - Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

17. Which of the following is not an example of a responsibility center?

A. Cost center.
B. Revenue center.
C. Profit center.
D. Investment center.
E. Contribution center.

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-02
Feedback A: This is an example of a responsibility center.
Feedback B: This is an example of a responsibility center.
Feedback C: This is an example of a responsibility center.
Feedback D: This is an example of a responsibility center.
Feedback E: Correct! Contribution center is not an example of a responsibility center.

18. A manufacturer's raw-material purchasing department would likely be classified as a:

A. cost center.
B. revenue center.
C. profit center.
D. investment center.
E. contribution center.

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-02
Feedback A: Correct! This would be a cost center.
Feedback B: This is not a revenue center.
Feedback C: This is not a profit center.
Feedback D: This is not an investment center.
Feedback E: This is not a contribution center.

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Chapter 12 - Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

19. Halpern Corporation is in the process of overhauling the performance evaluation system
for its San Diego manufacturing division, which produces and sells parts that are popular in
the aerospace industry. Which of the following is least likely to be chosen to evaluate the
overall operations of the San Diego division?
A. Cost center.
B. Responsibility center.
C. Profit center.
D. Investment center.
E. The profit center and investment center are equally unlikely to be chosen.

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 12-02
Feedback A: Correct! A cost center would be least likely to be chosen in this case.
Feedback B: A responsibility center could be chosen.
Feedback C: A profit center could be chosen.
Feedback D: An investment center could be chosen.
Feedback E: Both are likely to be chosen.

20. A cost center manager:

A. does not have the ability to produce revenue.
B. may be involved with the sale of new marketing programs to clients.
C. would normally be held accountable for producing an adequate return on invested capital.
D. often oversees divisional operations.
E. may be the manager who oversees the operations of a retail store.

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 12-02
Feedback A: Correct! A cost center manager does not have the ability to produce revenue.
Feedback B: This statement is incorrect.
Feedback C: This statement is incorrect.
Feedback D: This statement is incorrect.
Feedback E: This statement is incorrect.

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Chapter 12 - Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

21. The Telemarketing Department of a residential remodeling company would most likely be
evaluated as a:
A. cost center.
B. revenue center.
C. profit center.
D. investment center.
E. contribution center.

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-02
Feedback A: This statement is incorrect.
Feedback B: Correct! This would most likely be evaluated as a revenue center.
Feedback C: This statement is incorrect.
Feedback D: This statement is incorrect.
Feedback E: This statement is incorrect.

22. A revenue center manager:

A. does not have the ability to produce revenue.
B. may be involved with the sale of new marketing programs to clients.
C. would normally be held accountable for producing an adequate return on invested capital.
D. often oversees divisional operations.
E. may be the manager who oversees the operations of a retail store.

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 12-02
Feedback A: This statement is incorrect.
Feedback B: Correct! A revenue center manager may be involved with the sale of a new marketing program to a client.
Feedback C: This statement is incorrect.
Feedback D: This statement is incorrect.
Feedback E: This statement is incorrect.

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Chapter 12 - Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

23. If the head of a hotel's food and beverage operation is held accountable for revenues and
costs, the food and beverage operation would be considered a (n):
A. cost center.
B. revenue center.
C. profit center.
D. investment center.
E. contribution center.

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-02
Feedback A: This statement is incorrect.
Feedback B: This statement is incorrect.
Feedback C: Correct! This would be considered a profit center.
Feedback D: This statement is incorrect.
Feedback E: This statement is incorrect.

24. A profit center manager:

A. does not have the ability to produce revenue.
B. may be involved with the sale of new marketing programs to clients.
C. would normally be held accountable for producing an adequate return on invested capital.
D. often oversees divisional operations.
E. may be the manager who oversees the operations of a retail store.

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Research
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 12-02
Feedback A: This statement is incorrect.
Feedback B: This statement is incorrect.
Feedback C: This statement is incorrect.
Feedback D: This statement is incorrect.
Feedback E: Correct! This statement is correct regarding a profit center manager.

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