Responsibility Accounting and Balanced Scorecard

What is the primary goal of providing incentives for coordinating subunits' activities?

To motivate unit managers
To enhance financial performance
To promote goal congruence and coordination (correct)
To provide feedback to upper management

What is the purpose of spelling out a unit's most critical objectives?

To benchmark against industry best practices
To motivate unit managers
To provide feedback to upper management
To communicate expectations (correct)

What is the main objective of offering bonuses to unit managers?

To provide feedback to upper management
To enhance financial performance
To promote goal congruence
To motivate unit managers (correct)

Why is providing feedback to upper management important?

To maintain control over the organization (A) Signup and view all the answers

What is the main purpose of the balanced scorecard?

To consider both financial and operational performance measures (B) Signup and view all the answers

What is the main benefit of benchmarking?

To compare the company's achievements against industry best practices (B) Signup and view all the answers

What is the primary benefit of using a balanced scorecard?

To integrate financial and nonfinancial measures in a single system (C) Signup and view all the answers

What are key performance indicators (KPI) used for?

To measure critical factors that affect the company's success (D) Signup and view all the answers

What is the main difference between budgeting and reporting costs and revenues in responsibility accounting?

Distinguishing between controllable and noncontrollable costs (B) Signup and view all the answers

What is the primary goal of a profit entity in responsibility accounting?

Maximizing net income (A) Signup and view all the answers

What is the primary basis for evaluating the performance of a manager of an investment center?

Return on investment (ROI) (B) Signup and view all the answers

What is the purpose of a responsibility reporting system?

To prepare a report for each level of responsibility (B) Signup and view all the answers

What is the primary factor in evaluating the performance of a manager of a profit center?

Profitability of the center (B) Signup and view all the answers

Which type of responsibility center is responsible for generating revenues and incurring costs, and has investment funds available for use?

Investment center (A) Signup and view all the answers

What type of center is a manager of a production department or a service department usually in charge of?

Cost center (B) Signup and view all the answers

What is the main goal of performance evaluation systems in decentralized organizations?

To communicate company goals to subunit managers (C) Signup and view all the answers

What is the focus of a cost center's performance report?

Comparing actual controllable costs with flexible budget data (B) Signup and view all the answers

What is the primary purpose of decentralized operations in an organization?

To delegate decision-making authority to subunit managers (A) Signup and view all the answers

What is the primary responsibility of a manager in a revenue center?

Generating revenue (A) Signup and view all the answers

What is the main feature of a responsibility reporting system that allows top management to review budget reports?

Management by exception (B) Signup and view all the answers

What type of responsibility center is responsible for controlling operating revenues earned and all variable costs incurred?

Profit center (A) Signup and view all the answers

What is the primary benefit of using responsibility accounting systems in organizations?

To evaluate the performance of subunit managers (A) Signup and view all the answers

How many basic types of responsibility centers are there?

4 (C) Signup and view all the answers

What type of responsibility center is an example of a subsidiary company or a product line?

Investment center (D) Signup and view all the answers

What is the primary purpose of responsibility accounting?

To evaluate the performance of each responsibility center and its managers (D) Signup and view all the answers

What are the conditions necessary for responsibility accounting?

Costs and revenues can be directly associated with the specific level of management responsibility, and costs and revenues can be controlled by employees at the level of responsibility with which they are associated. (A) Signup and view all the answers

What is a responsibility center?

A part or subunit of an organization whose manager is accountable for specific activities (D) Signup and view all the answers

What is the main benefit of responsibility accounting in a decentralized company?

It is especially valuable in a decentralized company because control of operations is delegated to many managers throughout the organization (B) Signup and view all the answers

What is a segment in the context of responsibility accounting?

An area of responsibility for which reports are prepared (C) Signup and view all the answers

What is the main difference between a cost center and a profit center?

A cost center is responsible for controlling costs, while a profit center is responsible for generating revenue (A) Signup and view all the answers

What is the purpose of a responsibility report?

To evaluate the performance of each responsibility center and its managers (C) Signup and view all the answers

What is the basis for evaluating performance in an investment center?

Return on investment (ROI) (A) Signup and view all the answers