Management Accounting Ch 12 Problems

CHAPTER 12

FINANCIAL CONTROL

TRUE/FALSE

1. Financial control involves the use of financial measures to assess organizational and management performance.

a. True

b. False

2. Financial measures identify what is wrong with an organization, not simply provide a signal that something needs attention.

a. True

b. False

3. Financial measures can highlight falling sales and profits in an organization, but only nonfinancial measures can identify why this is occurring.

a. True

b. False

4. Properly chosen nonfinancial measures anticipate and help to explain financial results in an organization.

a. True

b. False

5. In a centralized organization, front-line employees are trained to respond to changes in the business environment.

a. True

b. False

6. The amount of decentralization in an organization reflects the organization's trust in its employees and other factors.

a. True

b. False

7. When an organization moves to decentralized decision making, control moves from results control to task control.

a. True

b. False

8. For an organization to be successful, activities within sales, manufacturing, and customer service need to be coordinated.

a. True

b. False

9. Organizations use nonfinancial control to provide a summary measure of how well their systems of operations control are working.

a. True

b. False

10. Properly chosen nonfinancial measures anticipate and explain financial results.

a. True

b. False

11. A support department, such as human resources, should be evaluated as a revenue center.

a. True

b. False

12. A major problem faced by cost centers is assigning jointly earned revenues.

a. True

b. False

13. A profit center is like an independent business.

a. True

b. False

14. The performance measures chosen should influence the employees' decision-making behavior.

a. True

b. False

15. For the segment manager to be properly evaluated, common costs should be allocated to the various segments, even if an arbitrary allocation is required.

a. True

b. False

16. Contribution margin is the best measure of the controllable contribution of a profit center toward organizational profit.

a. True

b. False

17. If a product line was eliminated, forecasted annual corporate profits in the short run would decrease by the amount of that product line's net income.

a. True

b. False

18. In general, managers are motivated to influence generated revenues when those revenues are included in their performance measures.

a. True

b. False

19. Conventional segment margin income statements clearly capture the interactive effects among responsibility centers.

a. True

b. False

20. A major goal of transfer pricing is to motivate the decision maker to act in the organization's best interests.

a. True

b. False

21. Transfer prices based on actual costs provide no incentive to the supplying division to control costs.

a. True

b. False

22. If external markets exist, then cost-based transfer prices are the most appropriate.

a. True

b. False

23. Negotiated transfer prices, and therefore production decisions, may reflect the negotiating skills of the parties rather than economic considerations.

a. True

b. False

24. Return on investment (ROI) encourages segment managers to reject all capital projects with returns greater than the company's cost of capital.

a. True

b. False

25. The most widely accepted definition of productivity is the ratio of output over input.

a. True

b. False

26. The financial measure, economic value added evaluates income relative to the level of investment required.

a. True

b. False

27. A sole ratio value is generally