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Question(s) / Instruction(s):

An operating unit of an organization is called a cost center if it is responsible

a)            Only for costs

b)            Only for revenues

c)            For costs and revenues

d)            For investments in assets

 

2. An operating unit that is responsible for revenues and costs is commonly referred to as a(n)

a)            Expense center

b)            Revenue center.

c)            Profit center

d)            Asset center

 

3.  Which of the following elements is not part of a management control system?

a)            Delegated decision authority

b)            Performance evaluation system

c)            Knowledge of local conditions

d)            Compensation and reward system

 

4. An operating unit of an organization is called an investment center if it is responsible

a)            Only for costs

b)            Only for revenues

c)            For costs and revenues

d)            For investments in assets.

 

5. Responsibility accounting defines an operating center that is responsible for revenue and costs as a(n) (CMA adapted)

a)            Profit center

b)            Revenue center

c)            Division

d)            Operating unit

e)            Investment center

 

6. Which one of the following will not occur in an organization that gives managers throughout the organization maximum freedom to make decisions? (CMA adapted)

a)            More effective solutions to operational problems

b)            Individual managers regarding the managers of other segments as they do external parties

c)            Two divisions of the organization having competing models that aim for the same market segments

d)            Delays in securing approval for the introduction of new products

e)            Greater knowledge of the marketplace and improved service to customers

 

7. Decentralization refers to the delegation of decision-making authority to

a)            Top management.

b)            Superiors

c)            Board of directors.

d)            Subordinates.

 

8. Which of the following is not a characteristic of a decentralized organization?

a)            Better use of local knowledge

b)            Better use of top management's time

c)            Reduced response time to environmental changes

d)            More decisions made by relatively few individuals

 

9. When managers are held responsible for costs and the input-output relationship is well specified, a(n) ________________________ is established.

a)            Standard cost center

b)            Revenue center

c)            Discretionary cost center

d)            Asset center

 

10. Assets invested in a responsibility center are included in a performance report of

                                       Profit Center                 INVESTMENT

a.                            Yes                                         NO

b.                            Yes                                         Yes

c.                             NO                                         NO

d.                            NO                                         Yes

a)            a

b)            b

c)            c

d)            d            

 

11. When comparing performance report information for top management with that of lower-level management, (CMA adapted)

a)            top management reports are more detailed.

b)            lower-level management reports are typically for longer time periods.

c)            top management reports show control over fewer costs.

d)            lower-level management reports are likely to contain more quantitative data and less financial data.

e)            top management reports are usually not of the exception type but present a complete analysis of all variances.

 

12. Which of the following is not an internal control?

a)            Rotating personnel among tasks

b)            Separation of duties

c)            Setting limits on the amount of expenditures

d)            Using absolute performance standards

 

13. The Sarbanes-Oxley Act of 2002 requires that management of publicly traded companies

a)            Use investment centers to evaluate top managers

b)            Report on the adequacy of the company's internal controls over financial reporting

c)            Compensate managers with fixed compensation plans only

d)            Eliminate stock options for managerial compensation

 

14. When comparing performance report information for top management with that of lower-level management, (CMA adapted)

a)            Top management reports are more detailed

b)            Lower-level management reports are typically for longer time periods

c)            Top management reports show control over fewer costs

d)            Lower-level management reports are likely to contain more quantitative data and less financial data

e)            Top management reports are usually not of the exception type but present a complete analysis of all variances

 

15. The least complex segment or area of responsibility for which costs are allocated is a(n) (CMA adapted)

a)            Profit center

b)            Investment center

c)            Contribution center

d)            Cost center

e)            Hybrid center

 

 

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