behavioural issues

7/26/2019 Behavioural Issues

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PART 3D

BEHAVIOURAL ISSUES

194 QUESTIONS

[1] Source: Publisher

In a responsibility accounting system, theprocess in which a supervisor and asubordinate jointly determine thesubordinate's goals and plans or achievingthese goals is

!" #op$down budgeting"

%" %ottom$up budgeting"

&" anagement by objectives"

(" anagement by e)ception"

[*] Source: &! 1*+* $-

.ichmond /nterprises is reviewing itspolicies and procedures in an eort toenhance goal congruence throughout theorgani0ation" #he processes that are mostliely to encourage this behavior are

!" Participatory budgeting, reciprocalcost allocation, andmanagement$by$objective perormanceevaluation"

%" .eciprocal cost allocation,0ero$base budgeting, and standardcosting"

&" &ost$based transer pricing, imposed

budgeting, and activity$based costing"

(" &ost$based transer pricing,management$by$objective perormanceevaluation, and participatory budgeting"

[] Source: &! -2+1 $*3ost irms use return on investment 4.5I6to evaluate the perormance o investmentcenter managers" I top management wishesdivision managers to use all assets withoutregard to inancing, the denominator in the.5I calculation will be

!" #otal assets available"

%" #otal assets employed"

&" 7oring capital plus other assets"

(" Shareholders' e8uity"

[3] Source: &! -2+1 $*+#he selection o the denominator in thereturn on investment 4.5I6 ormula iscritical to the measure's eectiveness"7hich denominator is critici0ed because itcombines the eects o operating decisionsmade at one level o the organi0ation withinancing decisions made at anotherorgani0ational level9

!" #otal assets employed"

%" 7oring capital"

&" #otal assets available"


[] Source: &! 1*+1 $+! segment o an organi0ation is reerred toas an investment center i it has

!" !uthority to mae decisions aectingthe major determinants o proitincluding the power to choose itsmarets and sources o supply"

%" !uthority to mae decisions aectingthe major determinants o proitincluding the power to choose itsmarets and sources o supply andsigniicant control over the amount oinvested capital"

&" !uthority to mae decisions over themost signiicant costs o operations

including the power to choose thesources o supply"

(" !uthority to provide speciali0edsupport to other units within theorgani0ation"

[2] Source: &! 1*+* $*3anagerial perormance can be measured inmany dierent ways, including return oninvestment 4.5I6 and residual income 4.I6"! good reason or using .I instead o .5I isthat

!" .I can be computed without regard

to identiying an investment base"

%" ;oal congruence is more liely to bepromoted by using .I"

&" .I is well understood and oten usedin the inancial press"

(" .5I does not tae into considerationboth the investment turnover ratio andreturn$on$sales percentage"

[


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charges costs to the manager who has theauthority to mae decisions incurring thecosts" =or e)ample, i a sales managerauthori0es a rush order that results inadditional manuacturing costs, theseadditional costs are charged to the salesmanager" #his type o accounting system isnown as

!" .esponsibility accounting"

%" =unctional accounting"

&" #ranser$pricing accounting"

(" &ontribution accounting"

[+] Source: &! 1*+3 $**I a manuacturing company usesresponsibility accounting, which one o theollowing items is least liely to appear in aperormance report or a manager o anassembly line9

!" Supervisory salaries"

%" aterials"

&" .epairs and maintenance"

(" /8uipment depreciation"

[1-] Source: PublisherIn evaluating an investment center, topmanagement should concentrate on

!" (ollar sales"

%" ?et income"

&" Proit percentages"

(" .eturn on investment"

[11] Source: Publisher#he return on investment calculationconsiders only the ollowing components:

S @ Sales I @ Investment ?I @ ?et income7hich o the ollowing ormulas best

describes the return on investmentcalculation9

!" 4I A S6 ) 4S A ?I6 @ I A ?I

%" 4S A I6 ) 4?I A S6 @ ?I A I

&" 4I A S6 ) 4?I A S6 @ 4I ) ?I6 ) 4S ) S6

(" 4S A I6 ) 4S A ?I6 @ 4S ) S6 A 4I ) ?I6

[1*] Source: Publisher7hich o the ollowing will not improvereturn on investment i other actors areconstant9

!" (ecreasing e)penses or assets"

%" Increasing selling prices"

&" Increasing sales volume whileholding i)ed e)penses constant"

(" ?one o the answers is correct"

[1] Source: &! -2>3 3$+.eturn on investment 4.5I6 is a term otenused to e)press income earned on capitalinvested in a business unit" ! company's.5I will increase i

!" Sales increase by the same dollaramount as e)penses and total assetsincrease"

%" Sales remain the same and e)pensesare reduced by the same dollar amountthat total assets increase"

&" Sales decrease by the same dollaramount that e)penses increase"

(" Sales and e)penses increase by the

same percentage that total assetsincrease"

[13] Source: Publisher#o properly motivate divisionalmanagement, the divisional .5Is should be

!" /8ual"

%" ;reater in the less proitabledivisions to motivate those divisions toachieve higher .5Is"

&" Bower in more proitable divisionsin which motivation is unnecessary"

(" (ierent based upon strategic goalso the irm"

[1] Source: Publisher;oal congruence is

!" #he desire and the commitment toachieve a speciic goal"

%" #he sharing o goals by supervisorsand subordinates"

&" #he e)tent to which individuals havethe authority to mae decisions"

(" #he e)tent o the attempt toaccomplish a speciic goal"

[12] Source: Publisher#he proposed transer price is based uponthe outlay cost" 5utlay cost plus opportunitycost is

!" #he retail price"

%" #he price representing the cashoutlows o the supplying division plusthe contribution to the supplyingdivision rom an outside sale"

&" #he price usually set by anabsorption$costing calculation"


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(" #he price set by charging orvariable costs plus a lump sum or anadditional marup, but less than ullmarup"

[1 per unit"

&" D*- per unit"

(" D** per unit"

[**] Source: &I! ->+ IC$12(ivision ! o a company is currentlyoperating at -F capacity" It produces asingle product and sells all its production tooutside customers or D1 per unit" Cariablecosts are D< per unit, and i)ed costs are D2per unit at the current production level"(ivision %, which currently purchases thisproduct rom an outside supplier or D1* perunit, would lie to purchase the productrom (ivision !" (ivision ! will operate at

>-F capacity to meet outside customers'and (ivision %'s demand" 7hat is theminimum price that (ivision ! shouldcharge (ivision % or this product9

!" D


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maret" .evenue and cost data are asollows:

Sales D-,--- Cariable costs 3,--- =i)ed costs 1*,---#he minimum transer price that should becharged to the beta division o the samecompany or each component is

!" D1*

%" D3

&" D32

(" D-

[*3] Source: &I! -+ IC$127hich o the ollowing is the mostsigniicant disadvantage o a cost$basedtranser price9

!" .e8uires internally developed

inormation"

%" Imposes maret eects on companyoperations"

&" .e8uires e)ternally developedinormation"

(" ay not promote long$termeiciencies"

[*] Source: &I! 11+ IC$1>5ne department o an organi0ation, =inal!ssembly, is purchasing subcomponentsrom another department, aterials

=abrication" #he price that will be chargedto =inal !ssembly by aterials =abricationis to be determined" 5utside maret pricesor the subcomponents are available" 7hicho the ollowing is the most correctstatement regarding a maret$based transerprice9

!" arginal production cost transerprices provide incentives to useotherwise idle capacity"

%" aret transer prices provide anincentive to use otherwise idlecapacity"

&" 5verall long term competitiveness isenhanced with a maret$based transerprice"

(" &orporate politics is more o aactor in a maret$based transer pricethan with other methods"

[*2] Source: &I! 11+ IC$1+#he /astern division sells goods internallyto the 7estern division o the samecompany" #he 8uoted e)ternal price inindustry publications rom a supplier near/astern is D*-- per ton plus transportation"It costs D*- per ton to transport the goods to

7estern" /astern's actual maret cost perton to buy the direct materials to mae thetranserred product is D1--" !ctual per tondirect labor is D-" 5ther actual costs o

storage and handling are D3-" #he companypresident selects a D**- transer price" #hisis an e)ample o

!" aret$based transer pricing"

%" &ost$based transer pricing"

&" ?egotiated transer pricing"

(" &ost plus *-F transer pricing"

[*] Source: &I! -+3 III$

! company plans to implement a bonus planbased on segment perormance" In addition,the company plans to convert to aresponsibility accounting system or segmentreporting" #he ollowing costs, which havebeen included in the segment perormancereports that have been prepared under thecurrent system, are being reviewed todetermine i they should be included in theresponsibility accounting segment reports:

I" &orporate administrative costs allocated on the basis onet segment sales"II" Personnel costs assigned on the basis o the number oemployees

in each segment"III" =i)ed computer acility costs divided e8ually among eachsegment"


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IC" Cariable computer operational costs charged to eachsegment based on actual hours used times a predetermined standardrateH any variable cost eiciency or ineiciency remains in thecomputer department"5 these our cost items, the only item thatcould logically be included in the segmentperormance reports prepared on aresponsibility accounting basis would be the

!" &orporate administrative costs"

%" Personnel costs"

&" =i)ed computer acility costs"

(" Cariable computer operational costs"

[-] Source: &I! 11+* IC$**!n organi0ation employs a system ointernal reporting that urnishesdepartmental managers with revenue and

cost inormation on only those items that aresubject to their control" Items not subject tothe manager's control are not included in theperormance reports" #his method oaccounting is nown as

!" &ontribution margin reporting"

%" Segment reporting"

&" !bsorption cost accounting"

(" .esponsibility accounting"

[1] Source: &I! ->+ IC$1

In a responsibility accounting system,managers are accountable or

!" Cariable costs but not or i)edcosts"

%" Product costs but not or periodcosts"

&" Incremental costs"

(" &osts over which they havesigniicant inluence"

[*] Source: Publisher

In a responsibility accounting system, aeedbac report that ocuses on thedierence between budgeted amounts andactual amounts is an e)ample o

!" anagement by e)ception"

%" !ssessing blame"

&" ;ranting rewards to successulmanagers"

(" Ignoring other variables or whichthe budgeted goals were met"

[] Source: Publisher#he ormat or internal reports in aresponsibility accounting system isprescribed by

!" ;enerally accepted accountingprinciples"

%" #he =inancial !ccounting Standards%oard"

&" #he !merican Institute o &ertiiedPublic !ccountants"

(" anagement"

[3] Source: &I! 11+1 IC$1+,2--

(" D*-,3--

[=act Pattern *];eorgia &o"'s tool division, !sh, incurredthe ollowing costs or year *:

Cariable =i)ed 99999999 99999999(irect materials D*3-,---

(irect labor 1>-,---=actory overhead >3,--- D -,3--;eneral, selling, and administrative 2,--- ,--- @@@@@@@@ @@@@@@@@(uring year *, !sh produced 2-,---hammers, which were sold or D*"3- each";eorgia's investment in !sh was D2--,---and D>3-,--- at Kanuary 1, year 1 andKanuary 1, year *, respectively" ;eorgianormally imputes interest on investments at1>F o average invested capital"

[>] Source: Publisher4.eers to =act Pattern *6=or the year ended (ecember 1, year *,!sh's return on average investment was

!" 1>F

%" *"


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and a projected year production level o3--,--- hammers, what will !sh'sestimated year total costs and e)penses be,assuming variable costs remain at D1"- perunit9

!" D23>,---

%" D,---

&" D,>--

(" D] Source: &! -2+3 $*3(ecentrali0ed irms can delegate authorityand yet retain control and monitor managers'perormance by structuring the organi0ation

into responsibility centers" 7hich one o theollowing organi0ational segments is mostlie an independent business9

!" .evenue center"

%" Proit center"

&" &ost center"

(" Investment center"

[2+] Source: &! 1*+3 $*-=airmount Inc" uses an accounting systemthat charges costs to the manager who has

been delegated the authority to mae thedecisions incurring the costs" =or e)ample,i the sales manager accepts a rush orderthat will result in higher than normalmanuacturing costs, these additional costsare charged to the sales manager because theauthority to accept or decline the rush orderwas given to the sales manager" #his type oaccounting system is nown as

!" .esponsibility accounting"

%" =unctional accounting"

&" .eciprocal allocation"

(" #ranser price accounting"

[


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Sherman &ompany uses a perormancereporting system that relects the company'sdecentrali0ation o decision maing" #hedepartmental perormance report shows oneline o data or each subordinate whoreports to the group vice president" #he datapresented show the actual costs incurredduring the period, the budgeted costs, andall variances rom budget or thatsubordinate's department" Sherman is usinga type o system called

!" &ontribution accounting"

%" &ost$beneit accounting"

&" =le)ible budgeting"

(" .esponsibility accounting"

[In responsibility accounting, a center'sperormance is measured by controllablecosts" &ontrollable costs are best described

as including

!" (irect material and direct labor,only"

%" 5nly those costs that the manager can

inluence in the current time period"

&" 5nly discretionary costs"

(" #hose costs about which the manageris nowledgeable and inormed"

[


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(" #he 7ire (ivision's air share o thesalary o Berner &orporation'spresident"

[] Source: &I! ->< IC$15vertime conditions and pay were recentlyset by the personnel department" #heproduction department has just received are8uest or a rush order rom the salesdepartment" #he production departmentprotests that additional overtime costs willbe incurred as a result o the order" #hesales department argues that the order isrom an important customer" #he productiondepartment processes the order" #o controlcosts, which department should never becharged with the overtime costs generatedas a result o the rush order9

!" Personnel department"

%" Production department"

&" Sales department"

(" Shared by production departmentand sales department"

[-] Source: &! 1*+* $**7hen using a contribution margin ormat orinternal reporting purposes, the majordistinction between segment managerperormance and segment perormance is

!" Jnallocated i)ed cost"

%" (irect variable costs o producingthe product"

&" (irect i)ed cost controllable by thesegment manager"

(" (irect i)ed cost controllable byothers"

[>1] Source: &! -2+1 $*+#he selection o the denominator in thereturn on investment 4.5I6 ormula iscritical to the measure's eectiveness"7hich denominator is critici0ed because itcombines the eects o operating decisionsmade at one level o the organi0ation withinancing decisions made at anotherorgani0ational level9

!" #otal assets available"

%" #otal assets employed"

&" 7oring capital"


[>*] Source: &! 1*+1 $+] Source: &! -2+ $*-./% Service &o" is a computer servicecenter" =or the month o ay 1++, ./%had the ollowing operating statistics:

Sales D3-,---5perating income *,---?et proit ater ta)es >,---#otal assets --,---Shareholders' e8uity *--,---&ost o capital 2F%ased on the above inormation, which oneo the ollowing statements is correct9 ./%

has a

!" .eturn on investment o 3F"

%" .esidual income o D4,---6"

&" .eturn on investment o 1"2F"

(" .esidual income o D4**,---6"

[+-] Source: &! 1*+2 $*#he segment margin o an investment centerater deducting the imputed interest on theassets used by the investment center isnown as

!" .eturn on investment"

%" .esidual income"

&" 5perating income"

(" .eturn on assets"

[+1] Source: &! 1*+2 $*-,---

%" D1,2*-,---

&" D1,>-,---

(" D,---,---

[113] Source: &! -2+< $-4.eers to =act Pattern 6Kames 7ebb is the general manager o theIndustrial Product (ivision, and hisperormance is measured using the residualincome method" 7ebb is reviewing theollowing orecasted inormation or hisdivision or ne)t year:

!mount &ategory 4thousands69999999999999999999 999999999997oring capital D 1,>--

.evenue -,---Plant and e8uipment 1--,---

&" D*,1-,---

(" D*,2+-,---

[11] Source: Publisher!n eective managerial control system hasavorable motivational eects" 7hich o theollowing are aspects o motivation9

anagerial ;oal /ort &ongruence 9999999999 9999999999 !"

?o ?o %"

?o Ges &"

Ges Ges ("

Ges ?o

[112] Source: Publisher;oal congruence is most liely to bepromoted when

!" ! company uses a cost$basedtranser price"

%" ! manager o a retail store ischarged imputed interest on inventory"

&" Percentage return on investmentrather than residual income is used tomeasure managerial perormance"

(" !n annual accrual accountingmeasure is used to evaluate a managerwho maes capital investmentdecisions"

[11] Source: Publisher#he e)tent to which a manager can inluenceorgani0ational activities is


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!" !uthority"

%" .esponsibility"

&" !ccountability"

(" &ontrollability"

[11+] Source: &! -2+ $*17hich one o the ollowing organi0ationalpolicies is most liely to result inundesirable managerial behavior9

!" Patel &hemicals sponsors televisioncoverage o cricet matches betweennational teams representing India andPaistan" #he e)penses o such mediasponsorship are not allocated to itsvarious divisions"

%" Koe 7al, the chie e)ecutive oicero /agle .oc %rewery, wrote amemorandum to his e)ecutives stating,5perating plans are contracts, and they

should be met without ail"

&" #he budgeting process at adsenanuacturing starts with operatingmanagers providing goals or theirrespective departments"

(" =ullbright Bighting holds 8uarterlymeetings o departmental managers toconsider possible changes in thebudgeted targets due to changingconditions"

[1*-] Source: Publisher!n advantage o participatory budgeting is

that it

!" inimi0es the cost o developingbudgets"

%" .educes the eect on the budgetaryprocess o employee biases"

&" Gields inormation nown tomanagement but not to employees"

(" /ncourages acceptance o the budgetby employees"

[1*1] Source: &! -2+ $*2

7hich one o the ollowing will not occur inan organi0ation that gives managersthroughout the organi0ation ma)imumreedom to mae decisions9

!" ore eective solutions tooperational problems"

%" Individual managers regarding themanagers o other segments as they doe)ternal parties"

&" #wo divisions o the organi0ationhaving competing models that aim orthe same maret segments"

(" (elays in securing approval or theintroduction o new products"

[1**] Source: Publisher%5 managers are most liely to believethat employees

!" (islie their wor"

%" !void responsibility wheneverpossible"

&" 7or best when threatened withpunishment"

(" !re sel$motivated"

[1*] Source: Publisher! budget is oten the result o amanagement$by$objectives 4%56 program"! characteristic o %5 is

!" (evelopment o a single measure oemployee perormance"

%" Statement o objectives in generalterms"

&" /stablishment o objectives throughboth top$down and bottom$upprocesses"

(" ! le)ible time rame orachievement o objectives"

[1*3] Source: Publisher! company has a compensation system orits managers based on an %5 approach"#he essential premise o %5 is that

!" &ompensation should be based on8ualitative actors"

%" /mployees should be concerned withroutine matters, and managers shouldattend to e)ceptions"

&" /mployees should participate insetting goals"

(" anagers should establish goals ortheir employees"

[1*] Source: Publisher7hich o the ollowing is a weaness ousing %5 or motivating employees9

!" /mployees may believe that theycontrol situations that arise in thecompany"

%" /mployees may be orced to placetoo much emphasis on 8uantitativeactors"

&" /mployees may participate too muchin the goal$setting process"

(" /mployees may become too trustingand too dependent on the team to getthings done"

[1*2] Source: Publisheranagerial perormance may be measuredin many ways" =or e)ample, an internalnoninancial measure is


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!" aret share"

%" (elivery perormance"

&" &ustomer satisaction"

(" anuacturing lead time"

[1*


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[1] Source: &I! -+3 III$-7hich o the ollowing is not an advantageo teamwor compared with worperormed by individuals9

!" #eams provide support to the teammembers"

%" #eams mae decisions that are moreeasily accepted"

&" #eams provide a clear lin betweeneort and outcome"

(" #eams control and disciplinemembers"

[12] Source: &I! 11+ III$*7hich o the ollowing is most liely toprovide or the continual development omanagerial sills9

!" 5rgani0ational orientation sessions"

%" Kob rotation"

&" .ole playing"

(" Biaison committees"

[117hich o the ollowing would not beconsidered a conlict trigger9

!" !mbiguous jurisdictions"

%" &ompetition or scarce resources"

&" Status dierential"

(" Superordinate goals"

[1>] Source: &I! -+3 II$+7hich o the ollowing is not an e)ample opositive reinorcement o behavior9

!" Paying a bonus to employees whohad no absences or any our$weeperiod"

%" ;iving written warnings ater onlyevery other absence"

&" !ssigning a mentor to eachemployee"

(" Laving a lottery every month where1-F o the employees with no absencesreceive a D*-- bonus"

[1+] Source: &I! -+3 III$>+#he process o disciplining employees ismade less eective by:

!" Stating the oending behaviorspeciically"

%" Postponing the start o disciplinaryprocedures"

&" Permitting employees to challenge

their culpability"

(" =ocusing the discussion on theoending behavior instead o theoender"

[13-] Source: &I! -+3 III$>!n organi0ation's management perceives theneed to change undamentally" 7hich o theollowing actors is management least lielyto change9

!" #he organi0ation's members"

%" #he organi0ation's structure"

&" #he organi0ation's environment"

(" #he organi0ation's technology"

[131] Source: &I! 11+3 II$*27hile conducting ieldwor, a strongconlict arises between two o your

subordinates regarding possible scopee)pansion" Gou draw their attention to theirshared views, downplaying the issues ocontention" #his techni8ue or resolvingconlict is called

!" Superordinate goals"

%" Smoothing"

&" Problem solving"

(" &ompromise"

[13*] Source: &I! -+ II$*

Jpon completing an audit o a majordivision o an international chemicalmanuacturer, the auditor noted that thedivision seemed to ocus almost solely onthe attainment o proits $$ with littleattention paid to other issues" #he auditorhad noted that the company's missionstatement emphasi0ed generating returns tothe stocholders" #he proit emphasis wasconsistent with the mission statement" #hisis an e)ample o

I" ! goal attainment approach in which the ends are theocus o attention and the means are evaluated only or their promotion o the ends

II" !n approach that is best suited or a company or divisionat the ormali0ation or initiali0ation phase o its businessIII" !n eective implementation o a strategic constituencies approach because the organi0ation is clearly ocused on developing returns or its stocholders !" I only"

%" I and II only"

&" III only"

(" I, II, and III"

[13] Source: &I! -+ II$

#he manager aces two potentiallyconlicting trends when ormulating thepresentation o audit reports: 4!6 theinormation age and the increase in


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inormation available or decision maingHand 4%6 the concept o boundedrationality, which pertains to the ability othe individuals to process data and maedecisions" 7hich o the ollowingapproaches to developing a report would beconsistent with the notion o boundedrationality9

!" Identiy the inormation mostavailable to encourage the user to maean optimal decision"

%" Identiy the problem, but let thedecision maer independently searchthe databases or the problem solution"

&" Present data in graphic orm to ocuson the major, more simple aspects ocomple) problems"

(" Suggest that a short time limit beplaced on the time to mae a decisionso that the decision maer willconcentrate on taing eective action in

a timely ashion"

[133] Source: &I! -+ II$3#here has been an increased emphasis ongroup decision maing in organi0ations"7hich o the ollowing statements has beenound to hold true in studies o individualdecision maing as compared to groupdecision maing9 Individual decisionmaing tends to

!" %e more conservative"

%" /valuate more complete inormation"

&" ;enerate more alternatives"

(" %e more time consuming"

[13] Source: &I! 11+ II$17hich o the ollowing statements aboutgroup decision maing is generallyconsidered alse9

!" #here is a lac o responsibility orgroup decisions"

%" ;roup decision maing is almostalways less eicient than individualdecision maing"

&" !lthough group members re8uentlyhave diverse views about a decision,each member's desire to be accepted bythe group oten restrains opendisagreement"

(" ;roup decision maing tends to beless creative than individual decisionmaing"

[132] Source: &I! 11+ II$1! manager notices that a particularsupervisor's perormance appraisal ratingsor any given subordinate tend to be

consistently high, consistently low, orconsistently in the middle across allperormance dimensions" 7hich one o theollowing is the best conclusion to draw

based on this observation9

!" #his supervisor is too lenient inperormance ratings"

%" #he perormance appraisal ormsprobably have too many leading8uestions"

&" #here may be a systematic bias in theway individuals are being rated"

(" #his supervisor is trying too hard totreat everyone the same"

[13] Source: &I! 11+ II$1>! manager must design a program to help

subordinates learn about a new procedurethat an organi0ation has implemented and isconsidering both classroom lecture andcomprehensive on$the$job 4e)periential6training approaches" 7hich one o theollowing is a disadvantage o thetraditional classroom lecture ormat as atraining method when compared to learningby e)perience9

!" It is more e)pensive"

%" It taes longer"

&" It is diicult to go in$depth on agiven topic"

(" #rainees do not easily retain whatthey learn in the classroom"

[13+] Source: &I! 11+ II$7hich one o the ollowing statements about8uality circles is alse9

!" ! 8uality circle is typicallycomprised o a group o > to 1-subordinates and supervisors"

%" Part o the 8uality circle conceptincludes teaching participants

communication sills, 8uality strategies,and problem analysis techni8ues"

&" Ouality circles meet on the company


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premises and on company time"

(" #he 8uality circle has the inalcontrol over implementation orecommended solutions"

[1-] Source: &I! 11+ II$2#o mae goal$setting eective andworthwhile, the goals should be

!" Kust beyond what subordinates areliely to reach"

%" Oualitative and appro)imate"

&" %ased on superior perormers'output"

(" Speciic, objective, and veriiable"

[11] Source: &I! 11+3 II$*>#he least eective method or an employeeto learn computer sills is

!" &lassroom training using e8uipment"

%" Cideo training"

&" !pprenticeships"

(" &ase analysis"

[1*] Source: &I! 11+2 II$>7hich o the ollowing statements is correctwith respect to a change in values9

!" Calues are neither stable norenduring"

%" #he process o 8uestioning valueswill result in a change"

&" Calues are not i)ed, and when theychange, they change 8uicly"

(" Calues are established in early yearsand are unliely to change"

[1] Source: &I! -+2 II$! manager discovers by chance that a newlyhired auditor has strong belies that are verydierent rom the manager's and rom thoseo most o the audit sta" #he manager's best

course o action would be to

!" =acilitate the reassignment o thenew hire as 8uicly as possible beorethis situation becomes disruptive"

%" !s the rest o the team or theirreaction and act according to the groupconsensus"

&" #ae no action unless the new hire'sbehavior is liely to cause harm to theorgani0ation"

(" #ry to counsel the new hire intomore reasonable belies"

[13] Source: &I! 11+2 II$

!" /valuate the tas outcome todetermine i the job gets done"

%" Jse multiple evaluators to increasereliability"

&" Jse multiple criteria because everyemployee is e)pected to do a number othings well"

(" /valuate the worer's traits, such asattitude, intelligence, or reliability"

[12] Source: PublisherI a company uses variable costing insteado absorption costing, it will always report

a

!" Ligher income"

%" Bower income"

&" Ligher inished goods inventory"

(" Bower inished goods inventory"

[12+] Source: PublisherJnder variable costing, proit luctuates inrelation to

!" Sales"

%" Production"

&" Inventory increases or decreases"

(" &hanges in i)ed manuacturingoverhead"

[=act Pattern 2];77 &ompany incurred the ollowingmanuacturing costs in its irst month ooperations"

.aw materials D1-,---(irect labor *-,---Cariable actory overhead *-,---=i)ed actory overhead -,---Production totaled *,--- units" Sales amounted to 1,+--units at aprice o D1-- each"

[1


24/64

[1


25/64

&" =i)ed and variable manuacturingcosts"

(" Sales and i)ed manuacturing costs"

[1>] Source: Publisher! company's le)ible budget shows ane)pected variable delivery e)pense oD12-,--- when sales are -,--- units" Isales total *,--- units, and the actualdelivery e)pense is D12,---, what will bethe given sales variance9

!" D,--- unavorable"

%" D,3-- unavorable"

&" D,--- avorable"

(" D,3-- avorable"

[1>3] Source: Publisher

! company's le)ible budget shows ane)pected i)ed cost o D1--,--- orstraight$line depreciation when sales total-,--- units" I sales total *,--- units, andthe actual cost o depreciation is D1-,---,what will be the budget variance9

!" D1,--- avorable"

%" D,--- avorable"

&" D1,--- unavorable"

(" D,--- unavorable"

[1>] Source: &! Samp O$1*#o meet Eylon &orporation's overallobjectives, the =rame (ivision has justinitiated a program to increase sales byimproving the manuacturing 8uality o itsproducts" #he most appropriate managementlevel to be responsible or this program isthe

!" Sales manager"

%" Production manager"

&" (ivision president"

(" .eceiving and inspection manager"

[1>2] Source: PublisherI a inancial managerMmanagementaccountant has a problem in identiyingunethical behavior or resolving an ethicalconlict, the irst action 4s6he shouldnormally tae is to

!" &onsult the board o directors"

%" (iscuss the problem with hisMherimmediate superior"

&" ?otiy the appropriate lawenorcement agency"

(" .esign rom the company"

[1>


26/64

[1+1] Source: Publisher=inancial managersMmanagement accountantsare obligated to maintain the higheststandards o ethical conduct" !ccordingly,the I! &ode o /thics e)plicitly re8uiresthat they

!" 5btain suicient competent evidencewhen e)pressing an opinion"

%" ?ot condone violations by others"

&" &omply with generally acceptedauditing standards"

(" !dhere to generally acceptedaccounting principles"

[1+*] Source: PublisherIntegrity is an ethical re8uirement or allinancial managersMmanagement accountants"5ne aspect o integrity re8uires

!" Perormance o proessional dutiesin accordance with applicable laws"

%" !voidance o conlict o interest"

&" .eraining rom improper use oinside inormation"

(" aintenance o an appropriate levelo proessional competence"

[1+] Source: Publisher! inancial managerMmanagement accountantdiscovers a problem that could mislead

users o the irm's inancial data and hasinormed hisMher immediate superior" 4S6heshould report the circumstances to the auditcommittee andMor the board o directors onlyi

!" #he immediate superior, who reportsto the chie e)ecutive oicer, nowsabout the situation but reuses to correctit"

%" #he immediate superior assures theinancial managerMmanagementaccountant that the problem will beresolved"

&" #he immediate superior reports thesituation to hisMher superior"

(" #he immediate superior, the irm'schie e)ecutive oicer, nows about thesituation but reuses to correct it"

[1+3] Source: PublisherIn which situation is a inancialmanagerMmanagement accountant permittedto communicate conidential inormation toindividuals or authorities outside the irm9

!" #here is an ethical conlict and theboard has reused to tae action"

%" Such communication is legallyprescribed"

&" #he inancial managerMmanagementaccountant nowingly communicates theinormation indirectly through asubordinate"

(" !n oicer at the inancialmanagerMmanagement accountant's banhas re8uested inormation on atransaction that could inluence theirm's stoc price"


27/64

CMA PART 3A

BEHAVIOURAL ISSUES

ANSWERS


!nswer 4!6 is incorrect because atop$down budget is generated by topmanagement and distributed to4imposed on6 lower$level managers"

!nswer 4%6 is incorrect because abottom$up budget is generated bylower$level management andaggregated as it moves through the chaino command"

!nswer 4&6 is correct" #he managementby objectives 4%56 approach is aprocedure in which a subordinate and asupervisor agree on goals and themethods o achieving them and develop

a plan in accordance with thatagreement" #he subordinate is thenevaluated with reerence to the plan atthe end o the plan period"

!nswer 4(6 is incorrect because themanagement by e)ception approachuses measurable standards anddeviations thererom to determine whenmanagement action is needed"

[*] Source: &! 1*+* $-

!nswer 4!6 is incorrect becausereciprocal cost allocation does nothing

to enhance goal congruence"

!nswer 4%6 is incorrect because

reciprocal cost allocation, 0ero$basebudgeting, and standard costing are notdesigned to enhance goal congruence"

!nswer 4&6 is incorrect becauseimposed budgeting and activity$basedcosting are not designed to enhance goalcongruence"

!nswer 4(6 is correct" #ranser pricesbased on cost promote goal congruenceby ensuring that purchases are made at

the lowest cost or the entity as a whole"anagement$by$objective 4%56perormance evaluation can also be agoal congruence tool" %5 is abehavioral, communications$oriented,responsibility approach to employeesel direction" %5 is based on thephilosophy that employees want towor hard i they only now what ise)pected, that employees lie to nowwhat their job actually is, and thatemployees are capable o sel directionand sel motivation" #he ey is tocoordinate managers' goals with theoverall goals o the organi0ation"Participation in budgeting by those

aected liewise encourages goalcongruence because those who tae partin the budget process are liely tosupport the outcome"

[] Source: &! -2+1 $*3

!nswer 4!6 is correct" #he .5Icalculation divides return 4income6 byinvested capital" Invested capital maybe deined in various ways, ore)ample, as total assets available, totalassets employed 4assets that are idle,such as vacant land, are e)cluded6,woring capital plus other assets4current liabilities are deducted romtotal assets to e)clude the assetsprovided by short$term creditors6, andstocholders' e8uity 4a portion olong$term liabilities must be allocatedto determine the manager's resourcebase6" #otal assets available is themeasure o invested capital thatassumes the manager will use all assetswithout regard to inancing"

!nswer 4%6 is incorrect because use ototal assets employed assumes that

higher$level management has notre8uired the manager to assumeresponsibility or idle assets"

!nswer 4&6 is incorrect becausededucting current liabilities eectivelye)cludes assets inanced by short$termcredit"

!nswer 4(6 is incorrect becauseshareholders' e8uity is determined bydeducting total liabilities rom totalassets" #hus, this measure o theinvestment base also considers the issueo inancing"

[3] Source: &! -2+1 $*+

!nswer 4!6 is incorrect because totalassets employed does not relectinancing decisions"

!nswer 4%6 is incorrect becausededucting current liabilities romcurrent assets to arrive at woringcapital relects the control that themanager o the responsibility centerordinarily has over short$term credittransactions"

!nswer 4&6 is incorrect because total

assets available does not relectinancing decisions"

!nswer 4(6 is correct" Stocholders'e8uity e8uals total assets minus totalliabilities" #he latter include short$termliabilities incurred at operating levelso the organi0ation and long$termliabilities resulting rom inancingdecisions made by top management"!ccordingly, the investment base usedto measure the perormance o amanager may relect the incurrence oliabilities over which 4s6he had nocontrol" ! second problem is that theallocation o long$term liabilities

among divisions or segments may besomewhat arbitrary"


28/64

[] Source: &! 1*+1 $+

!nswer 4!6 is incorrect because aninvestment center has authority not onlyover costs and revenues, but alsocapital invested"

!nswer 4%6 is correct" !n investmentcenter is responsible or revenues,e)penses, and invested capital" .eturnon investment is usually the eyperormance measure o an investmentcenter"

!nswer 4&6 is incorrect because aninvestment center also has authorityover revenues and invested capital"

!nswer 4(6 is incorrect because aservice center supports otherorgani0ational units"

[2] Source: &! 1*+* $*3

!nswer 4!6 is incorrect because aninvestment base is need to calculateresidual income"

!nswer 4%6 is correct" #he residualincome method calculates the e)cess othe return on an investment over atargeted amount e8ual to an imputedinterest charge on invested capital" #herate used is usually the weightedaverage cost o capital" .esidualincome may be preerable to .5Ibecause an enterprise will beneit rome)pansion as long as residual income isearned" Jsing a .5I, e)pansion mightbe rejected i it lowered .5I even

though residual income would increase"#hus, the residual income methodpromotes the congruence o a manager'sgoal with those o the enterprise"!ctions that tend to beneit the companywill also tend to improve the measureo the manager's perormance"

!nswer 4&6 is incorrect because .5I ismore widely used than residual income"

!nswer 4(6 is incorrect because bothmeasures consider the same items"

[] Source: &! -2+3 $*>

!nswer 4!6 is correct" ! well$designedresponsibility accounting systemestablishes responsibility centers withinan organi0ation" anagerialperormance should be evaluated onlyon the basis o those actorscontrollable by the manager" anagersmay control revenues, costs, andMorinvestment activities" #he responsibilitysystem should induce managementperormance that adheres to overallcompany objectives" &harging the costso a rush order to the sales manager

who authori0ed the job creates anincentive or that individual to minimi0esuch costs"

!nswer 4%6 is incorrect becauseunctional accounting accumulates costsand assets or each service provided orunction perormed, without necessarilyassigning responsibility or such costs"

!nswer 4&6 is incorrect because atranser$pricing system charges onesegment o an organi0ation or goodsand services that are provided byanother segment within the organi0ation"

!nswer 4(6 is incorrect becausecontribution accounting emphasi0esvariable costs and their relationshipwith revenues, but disassociates i)ed

costs rom the departments responsible"

[+] Source: &! 1*+3 $**

!nswer 4!6 is incorrect because themanager o an assembly line is liely tobe responsible or the salaries osupervisors, which is to some degreecontrollable by the manager"

!nswer 4%6 is incorrect because themanager o an assembly line is liely tobe responsible or the materials, whichis to some degree controllable by themanager"

!nswer 4&6 is incorrect because themanager o an assembly line is liely tobe responsible or the repairs andmaintenance, which is to some degreecontrollable by the manager"

!nswer 4(6 is correct" .esponsibilityaccounting holds managers responsibleonly or actors under their control" #hedepreciation o e8uipment will

probably not appear on the perormancereport o an assembly$line managerbecause the manager usually has nocontrol over the investment in the


29/64

e8uipment"

[1-] Source: Publisher

!nswer 4!6 is incorrect because dollarsales do not give a measure o operatingperormance based on resourcesre8uired"

!nswer 4%6 is incorrect because netincome does not give a measure ooperating perormance based onresources re8uired"

!nswer 4&6 is incorrect because proitpercentages do not give a measure ooperating perormance based onresources re8uired"

!nswer 4(6 is correct" /ach investmentcenter o a business should be evaluatedbased upon return on investment tojudge operating perormance" .5I iscomparable to calculations made both

within and without a particularorgani0ation" anagement may reviewthe investment opportunities availablewithin or without the irm" In essence,net income is stated as a proportion oinvestment capital 4resources re8uired6"


!nswer 4!6 is incorrect because I A ?Iis the reciprocal o return oninvestment"

!nswer 4%6 is correct" #he irst term inthe ormula or return on investment is

the number o times investment capitalhas turned over through the salesmechanism 4S A I6" #his amount ismultiplied by the net income e)pressedas a percentage o sales 4?I A S6 to givethe return on investment 4?I A I6" #hebasic ormula or return on investmentis thereore

4S A I6 ) 4?I A S6 @ ?I A I"

!nswer 4&6 is incorrect because salesmust be divided by investment 4S A I6 todetermine the number o timesinvestment capital has turned over,

which results in ?I A I as return oninvestment"

!nswer 4(6 is incorrect because netincome must be e)pressed as apercentage o sales 4?I A S6, whichresults in ?I A I as return on investment"

[1*] Source: Publisher

!nswer 4!6 is incorrect becausedecreasing e)penses or assets whileholding other actors constant improvesreturn on investment"

!nswer 4%6 is incorrect becauseincreasing selling prices while holdingother actors constant improves returnon investment"

!nswer 4&6 is incorrect becauseincreasing sales volume while holdingother actors constant improves returnon investment"

!nswer 4(6 is correct" .5I e8uals netincome divided by investment"Increasing net income 4e"g", bydecreasing e)penses or by increasingprices or sales volume6 or decreasingthe investment base improves .5I"Lence, any o the actions listedincreases the return on investment"anagement and the accountingproession are very concerned withclassiication o e)penses and assetsand other decisions involving theaccounting or these items to achieve aproper calculation o return oninvestment"

[1] Source: &! -2>3 3$+

!nswer 4!6 is incorrect because .5I4?I A I6 will decrease i investment4total assets6 increases while ?Iremains the same"

!nswer 4%6 is correct" #he basicormula or return on investment is 4S AI6 ) 4?I A S6 @ ?I A I" I ?I increases4because e)penses have decreased6 bythe same amount that I increases4because total assets have increased6,.5I will increase" =or e)ample, i ?Ie8uals 1-- and I e8uals 1,---, the .5Iis 1-F" !n increase o *- in each termraises the .5I to 11">F"

!nswer 4&6 is incorrect because areduction in ?I causes a decrease in.5I i investment is constant"

!nswer 4(6 is incorrect because .5I4?I A I6 does not change i the companyoriginally had a net proit and the netproit on sales 4sales $ e)penses6increases by the same percentage as thetotal assets"


!nswer 4!6 is incorrect because e8ualgoals should not be set owing to

dierences in competitive environment,the strategic goals o the irm, and ris"

!nswer 4%6 is incorrect because usinggreater divisional .5Is in the lessproitable divisions to motivate thosedivisions to achieve higher .5Is wouldnot necessarily improve divisionalperormance"

!nswer 4&6 is incorrect because lowerdivisional .5Is in more proitabledivisions in which motivation isunnecessary would liely suboptimi0edivisional perormance"

!nswer 4(6 is correct" /ach divisionwithin a irm should have an .5I basedon the strategic goals o the irmconsistent with its competitive


30/64

environment"


!nswer 4!6 is incorrect becausemotivation is the desire and thecommitment to achieve a speciic goal"

!nswer 4%6 is correct" ;oal congruenceis agreement on the goals o theorgani0ation andMor the segment by bothsupervisors and subordinates"Perormance is assumed to beoptimi0ed when there is anunderstanding that personal andsegmental goals be consistent withthose o the organi0ation"

!nswer 4&6 is incorrect becauseautonomy is the e)tent to whichindividuals have the authority to maedecisions"

!nswer 4(6 is incorrect because

managerial eort is the e)tent o theattempt to accomplish a speciic goal"


!nswer 4!6 is incorrect because theretail price is the deinition o themaret price, assuming an arm's$lengthtransaction"

!nswer 4%6 is correct" !t this price, thesupplying division is indierent as towhether it sells internally or e)ternally"5utlay cost plus opportunity costthereore represents a minimum

acceptable price or a seller" Lowever,no transer price ormula is appropriatein all circumstances"

!nswer 4&6 is incorrect because ullcost is the price usually set by anabsorption$costing calculation"

!nswer 4(6 is incorrect because thevariable$cost$plus price is the price setby charging or variable costs plus alump sum or an additional marup, butless than ull marup"


!nswer 4!6 is incorrect because themaret price is the price on the openmaret"

!nswer 4%6 is incorrect because theoutlay cost plus opportunity cost is theprice representing the cash outlows othe supplying division plus thecontribution to the supplying divisionrom an outside sale"

!nswer 4&6 is correct" =ull$cost priceis the price usually set by anabsorption$costing calculation andincludes materials, labor, and a ull

allocation o manuacturing 5ML" #hisull$cost price may lead todysunctional behavior by the supplyingand receiving divisions, e"g",purchasing rom outside sources at aslightly lower price that is substantiallyabove the variable costs o internalproduction"


[1+] Source: &I! 11+- IC$*-

!nswer 4!6 is incorrect becauseineiciencies are charged to the buyingdepartment"

!nswer 4%6 is correct" #he optimaltranser price o a selling divisionshould be set at a point that will havethe most desirable economic eect onthe irm as a whole while at the sametime continuing to motivate themanagement o every division toperorm eiciently" Setting the transerprice based on actual costs rather thanstandard costs would give the selling

division little incentive to control costs"

!nswer 4&6 is incorrect because, bydeinition, cost$based transer pricesare not adjusted by a marup ormardown"

!nswer 4(6 is incorrect becausecost$based transer prices provide theadvantages o clarity and administrativeconvenience"

[*-] Source: &I! 11> IC$

!nswer 4!6 is incorrect because

outside purchase will increase thecompany's cost o sales by D1- per unit"

!nswer 4%6 is incorrect because the


31/64

transer price is irrelevant to thedecision" It does not aect overallproits"

!nswer 4&6 is incorrect because thecompany is initially concerned withcovering variable rather than i)edcosts"

!nswer 4(6 is correct" 5pportunitycosts are D- because !'s acilitieswould be idle i % did not purchaserom !" !ssuming i)ed costs are notaected by the decision, theintracompany sale is preerable romthe company's perspective because !'sD- variable unit cost is less than theoutside vendor's price o D3-"

[*1] Source: &I! -+* IC$1+

!nswer 4!6 is incorrect because D1*per unit merely allows (ivision E torecover its unit variable cost"

!nswer 4%6 is correct" ! unit price oD1> is less than (ivision G's cost opurchase rom an outside supplier bute)ceeds (ivision E's production cost"!ccordingly, both G and E beneit"

!nswer 4&6 is incorrect because, at D*-per unit, (ivision G may be indierentas to whether it purchases internally ore)ternally" %uying rom an outsidesource or D*- per unit is contrary to thecompany's interests given idle capacityavailable or the component'smanuacture and an incremental unitcost o D*-"

!nswer 4(6 is incorrect because, at D**per unit, (ivision G would haveincentive to purchase rom an e)ternalsupplier 4i"e" maret price is D*-6"

[**] Source: &I! ->+ IC$12

!nswer 4!6 is correct" =rom the seller'sperspective, the price should relect atleast its incremental cash outlow4outlay cost6 plus the contribution roman outside sale 4opportunity cost6"%ecause ! has idle capacity, theopportunity cost is D-" #hus, the

minimum price (ivision ! shouldcharge (ivision % is D> IC$1+

!nswer 4!6 is incorrect because thealpha division has no idle capacity"

!nswer 4%6 is incorrect because theopportunity cost needs to be included"

!nswer 4&6 is incorrect because theminimum transer price e8uals outlay4variable6 costs plus opportunity cost,not variable costs plus i)ed costs"

!nswer 4(6 is correct" In a perectlycompetitive maret, maret price isordinarily the appropriate transerprice" %ecause the maret price isobjective, using it avoids waste andma)imi0es eiciency" In a perectlycompetitive maret, the maret pricee8uals the minimum transer price,which is the sum o outlay cost andopportunity cost" 5utlay cost is thevariable cost per unit, or D3 4D3,---A 1,---6" 5pportunity cost is the

contribution margin oregone, or D124D- $ D36" #hus, the minimum transerprice is D- 4D3 Q D126"

[*3] Source: &I! -+ IC$12

!nswer 4!6 is incorrect becauseinternally developed inormation shouldbe developed whether or not transerprices are used"

!nswer 4%6 is incorrect because mareteects on company operations arecharacteristic o a maret$basedtranser price"

!nswer 4&6 is incorrect becausee)ternally developed inormation isneeded or a maret$based transerprice"

!nswer 4(6 is correct" ! cost$basedtranser price is a price charged in anintracompany transaction that coversonly the selling subunit's costs"Lowever, by ignoring relevantalternative maret prices, a companymay pay more than is necessary toproduce goods and services internally"

[*] Source: &I! 11+ IC$1>

!nswer 4!6 is incorrect becausemarginal production cost transer pricesdo not relate to maret$based transerprices"

!nswer 4%6 is incorrect becausemarginal cost based transer pricesprovide more o an incentive to thepurchasing division to buy internallyand thus use idle acilities o the sellingdivision than does the usually highermaret$based transer price"

!nswer 4&6 is correct" ! transer price

is the price charged in an intercompanytransaction" aret$based pricesprovide maret discipline becauseeicient internal suppliers will tend to


32/64

prosper, thereby enhancing the overalllong$term competitiveness o the irm"

!nswer 4(6 is incorrect becausecorporate politics is less o a actorthan in other methods, such as anegotiated transer price" aret$basedprices are objective"

[*2] Source: &I! 11+ IC$1+

!nswer 4!6 is correct" ! transer priceis the price charged by one segment oan organi0ation or a product or servicesupplied to another segment o the sameorgani0ation" #he three basic criteriathat the transer pricing system in adecentrali0ed company should satisyare to 416 provide inormation allowingcentral management to evaluatedivisions with respect to total companyproit and each division's contributionto proit, 4*6 stimulate each manager'seiciency without losing each

division's autonomy, and 46 motivateeach divisional manager to achievehisMher own proit goal in a mannercontributing to the company's success"%ecause the D**- transer priceselected is based on the 8uoted e)ternalprice 4maret6, it is an e)ample omaret$based transer pricing"

!nswer 4%6 is incorrect because thecost$based price would be D*1- 4D1--Q D- Q D3- Q D*-6"

!nswer 4&6 is incorrect because nonegotiations too place"

!nswer 4(6 is incorrect because costplus *-F would be D** 4D*1- ) 1"*-6"

[*] Source: &I! -+3 III$


33/64

which is under each segment's control"#he predetermined standard rate is setat the beginning o the year and isnown by the segment managers"oreover, the eiciencies andineiciencies o the computerdepartment are not passed on to thesegments" %oth procedures promote adegree o control by the segments"

[-] Source: &I! 11+* IC$**

!nswer 4!6 is incorrect becausecontribution margin reporting separatescosts by behaviorH variable costs arelisted irst ollowed by i)ed costs"Some responsibility accounting systemsuse a contribution margin reportingormat, but contribution marginreporting alone can include costs notcontrollable by a manager"

!nswer 4%6 is incorrect becausesegment reporting is preparation o

perormance reports by reportablesegments" Segment reports oten includeallocated costs that are not controllableby managers"

!nswer 4&6 is incorrect becauseabsorption cost accounting ischaracteri0ed by its treatment o i)edmanuacturing overhead as a productcost"

!nswer 4(6 is correct" .esponsibilityaccounting stresses that managersshould only be held responsible oractors under their control" #o achievethis objective, the operations o the

business are broen down intoresponsibility centers" &osts areclassiied as controllable andnoncontrollable to assign responsibility"#he assignment o responsibilityimplies that some revenues and costscan be changed through eectivemanagement" ! responsibilityaccounting system should have certaincontrols that provide or eedbacreports indicating deviations rome)pectations" anagement may thenocus on those deviations or eitherreinorcement or correction"

[1] Source: &I! ->+ IC$1

!nswer 4!6 is incorrect because allvariable costs may not be controllable,but some, i not all, i)ed costs might becontrollable"

!nswer 4%6 is incorrect because not allbudgeted costs are controllable bymanagers"

!nswer 4&6 is incorrect because allproduct costs may not be controllable,but some, i not all, period costs mightbe controllable"

!nswer 4(6 is correct" #he mostdesirable measure or evaluating adepartmental manager is one that holdsthe manager responsible or the

revenues and e)penses 4s6he cancontrol" &ontrollability is the basicconcept o responsibility accounting"

[*] Source: Publisher

!nswer 4!6 is correct" ! responsibilityaccounting system should have certaincontrols that provide or eedbacreports indicating deviations rome)pectations" anagement may thenocus on those deviations 4e)ceptions6or either reinorcement or correction"

!nswer 4%6 is incorrect because theresponsibility accounting system shouldnot be used e)clusively to assess blame"

!nswer 4&6 is incorrect because theresponsibility accounting system shouldnot be used e)clusively to giverewards"


eedbac reports concentrate ondeviations, but not to the total e)clusiono other budgeted variables"

[] Source: Publisher

!nswer 4!6 is incorrect becausegenerally accepted accountingprinciples concern e)ternal inancialreporting, not internal reporting"

!nswer 4%6 is incorrect because the=inancial !ccounting Standards %oardconcerns e)ternal inancial reporting,not internal reporting"

!nswer 4&6 is incorrect because the!merican Institute o &ertiied Public!ccountants concerns e)ternal inancialreporting, not internal reporting"

!nswer 4(6 is correct" #heresponsibility or internal reports ismanagement's" anagement may directthe accountant to provide a report in anyormat deemed suitable or the decisionprocess" #he accountant should worclosely with management to mae thesereports an eective communicationdevice regarding the irm and itsdecisions"

[3] Source: &I! 11+1 IC$1-, its netincome is D*-" ;iven invested capitalo D1--, .5I is *-F 4D*- A D1--6" Isales and e)penses both increase 1-Fto D11- and D>>, respectively, netincome increases to D**" .5I will thenbe **F 4D** A D1--6"

[>3] Source: &! -2+ $1*

!nswer 4!6 is incorrect becauseSanders and &arolina would accept theproject"

!nswer 4%6 is incorrect becauseSanders and &arolina would accept theproject"

!nswer 4&6 is correct" .esidual incomeis the e)cess o the return on aninvestment over a targeted amount,which is e8ual to an imputed interestcharge on invested capital 4in this case,>F6" #he rate is usually theweighted$average cost o capital" Someenterprises preer to measuremanagerial perormance in terms o theamount o residual income rather thanthe percentage .5I" #he principle isthat the enterprise is e)pected to beneitrom e)pansion as long as residualincome is earned" Jsing a percentage.5I approach, e)pansion might berejected i it lowered .5I, even thoughresidual income would increase" Jsingresidual income, both &arolina andSanders would accept the new projectbecause residual income will increase

i a 1*F return is earned when thetarget .5I is only >F"

!nswer 4(6 is incorrect becauseSanders and &arolina would accept theproject"

[>] Source: &! -2+ $11

!nswer 4!6 is correct" ! company withan >F .5I threshold should obviouslyaccept a project yielding 1*F becausethe company's overall .5I wouldincrease" #he manager being evaluatedon the basis o .5I who is already

earning 13F will be unwilling toaccept a 1*F return on a new projectbecause the overall .5I or the divisionwould decline slightly" #his absence ogoal congruence suggests a weaness in.5I$based perormance evaluation"

!nswer 4%6 is incorrect because&arolina would accept a projectyielding a return greater than >F, andSanders would reject a return yieldingless than 13F"

!nswer 4&6 is incorrect because&arolina would accept a projectyielding a return greater than >F, and

Sanders would reject a return yieldingless than 13F"

!nswer 4(6 is incorrect because&arolina would accept a projectyielding a return greater than >F, andSanders would reject a return yieldingless than 13F"

[>2] Source: &! -2+ $*>] Source: &! -2+3 $*+

!nswer 4!6 is incorrect because .5I isbased on all assets, not just currentinvestment e)penditures"

!nswer 4%6 is incorrect because thecalculation o .5I does not adjust orimputed interest on invested capital"

!nswer 4&6 is incorrect because thedenominator would not be limited toi)ed assets"

!nswer 4(6 is correct" .5I iscalculated by dividing income by

invested capital" It is a ey perormancemeasure o an investment center"Invested capital may be deined invarious ways, such as shareholders'

e8uity, total assets available, or totalassets employed 4which e)cludes assetsthat are idle6" #otal assets available isthe measure that assumes the managerwill use all assets without regard toinancing"

[>+] Source: &! -2+ $*-

!nswer 4!6 is incorrect because,although the irm's return on e8uityinvestment was 3F, its return on allunds invested was F 4D*,--- preta)operating income A D--,---6"

!nswer 4%6 is correct" .eturn oninvestment is commonly calculated bydividing preta) income by total assetsavailable" .esidual income is thee)cess o the return on investment overa targeted amount e8ual to an imputedinterest charge on invested capital" #herate used is ordinarily theweighted$average cost o capital" Some

companies measure managerialperormance in terms o the amount oresidual income rather than thepercentage return on investment"%ecause ./% has assets o D--,---and a cost o capital o 2F, it must earnD-,--- on those assets to cover thecost o capital" ;iven that operatingincome was only D*,---, it had anegative residual income o D,---"

!nswer 4&6 is incorrect because .5I iscommonly based on beore$ta) income"

!nswer 4(6 is incorrect becauseD4**,---6 e8uals the dierence

between net proit ater ta)es andtargeted income"

[+-] Source: &! 1*+2 $*

!nswer 4!6 is incorrect because these.5I computations do not subtractimputed interest on capital used romthe investment base"

!nswer 4%6 is correct" .esidual incomeis the e)cess o the amount o return oninvestment 4.5I6 over a targetedamount e8ual to an imputed interestcharge on invested capital" #he rate

used to impute the interest is usually theweighted$average cost o capital" #headvantage o using residual incomerather than percentage .5I is that theormer emphasi0es ma)imi0ing anamount instead o a percentage"anagers are encouraged to acceptprojects with returns e)ceeding the costo capital even i the investments reducethe percentage .5I"

!nswer 4&6 is incorrect becauseoperating income e8uals operatingrevenues minus operating costs"

!nswer 4(6 is incorrect because these

.5I computations do not subtractimputed interest on capital used romthe investment base"


45/64

[+1] Source: &! 1*+2 $*

!nswer 4!6 is incorrect because thisarrangement creates no disincentive orthe seller" It will mae a proit on everyunit transerred"

!nswer 4%6 is correct" ;iven that thePlastics (ivision 4the seller6 has e)cesscapacity, transers within the companyentail no opportunity cost" !ccordingly,

the transer at the negotiated price willimprove the perormance measures othe transeror" Purchasing internally atbelow the maret price also beneits thetranseree, so the motivational purposeo transer pricing is achieved" #he goalcongruence purpose is also achievedbecause the internal transaction beneitsthe company"

!nswer 4&6 is incorrect because themaret price charged by outside sourcesis higher than the negotiated price"

!nswer 4(6 is incorrect because, givenidle capacity, selling at any amount in

e)cess o variable cost should motivatethe seller"

[+] Source: &I! 11>> IC$*

!nswer 4!6 is incorrect because maretprice is an approach to determine atranser price"

!nswer 4%6 is correct" ! transer priceis the price charged by one segment oan organi0ation or a product or servicesupplied to another segment o the sameorgani0ation"

!nswer 4&6 is incorrect because outlay

price is an approach to determine atranser price"

!nswer 4(6 is incorrect becausedistress price is an approach todetermine a transer price"

[++] Source: Publisher

!nswer 4!6 is correct" otivation isthe desire to attain a speciic goal 4goalcongruence6 and the commitment toaccomplish the goal 4managerial eort6"anagerial motivation is thereore acombination o managerial eort and

goal congruence"

!nswer 4%6 is incorrect because goalcongruence is the sharing o goals bysupervisors and subordinates"

!nswer 4&6 is incorrect becauseautonomy is the e)tent to whichindividuals have the authority to maedecisions"

!nswer 4(6 is incorrect becausemanagerial eort is the e)tent o theattempt to accomplish a speciic goal"

[1--] Source: Publisher

!nswer 4!6 is incorrect because theretail price is the deinition o themaret price, assuming an arm's$lengthtransaction"

!nswer 4%6 is correct" !t this price, thesupplying division is indierent as towhether it sells internally or e)ternally"5utlay cost plus opportunity costthereore represents a minimumacceptable price or a seller" Lowever,no transer price ormula is appropriatein all circumstances"

!nswer 4&6 is incorrect because ullcost is the price usually set by anabsorption$costing calculation"


47/64


[1-1] Source: Publisher

!nswer 4!6 is incorrect because theprice on the open maret is thedeinition o the maret price"

!nswer 4%6 is incorrect because outlaycost plus opportunity cost is the pricerepresenting the cash outlows o thesupplying division plus the contributionto the supplying division rom anoutside sale"

!nswer 4&6 is incorrect because theull$cost price is the price usually set byan absorption$costing calculation"

!nswer 4(6 is correct" #hevariable$cost$plus price is the price setby charging or variable cost plus eithera lump sum or an additional marup butless than the ull marup price" #hispermits top management to enter thedecision process and dictate that adivision transer at variable cost plussome appropriate amount"

[1-*] Source: &I! 11+1 IC$1+

!nswer 4!6 is incorrect because themaret price will better achieve thegoals o a transer pricing system" #he

selling unit would not have as strong anincentive to control costs i somevariant o actual cost is used" #heeiciency o the purchasing unit is alsopromoted when it must treat the sellingunit as i it were an independent vendor"

!nswer 4%6 is incorrect because themaret price will better achieve thegoals o a transer pricing system" #heselling unit would not have as strong anincentive to control costs i somevariant o actual cost is used"

!nswer 4&6 is incorrect because themaret price will better achieve the

goals o a transer pricing system" #heselling unit would not have as strong anincentive to control costs i somevariant o actual cost is used"

!nswer 4(6 is correct" #he three basiccriteria that the transer pricing systemin a decentrali0ed company shouldsatisy are to: 416 provide inormationallowing central management toevaluate divisions with respect to totalcompany proit and each division'scontribution to proit, 4*6 stimulate eachmanager's eiciency without losingeach division's autonomy, and 46motivate each divisional manager to

achieve hisMher own proit goal in amanner contributing to the company'ssuccess" #he maret price should beused as the transer price to avoid

waste and ma)imi0e eiciency in acompetitive economy 4an outsidemaret in which all padding producedcan be sold6" #his price also measuresthe product's proitability and thedivision managers' perormance in acompetitive environment"

[1-] Source: &I! 11+- IC$*-

!nswer 4!6 is incorrect becauseineiciencies are charged to the buyingdepartment"

!nswer 4%6 is correct" #he optimaltranser price o a selling divisionshould be set at a point that will havethe most desirable economic eect onthe irm as a whole while at the sametime continuing to motivate themanagement o every division toperorm eiciently" Setting the transerprice based on actual costs rather thanstandard costs would give the selling

division little incentive to control costs"

!nswer 4&6 is incorrect because, bydeinition, cost$based transer pricesare not adjusted by some marup"

!nswer 4(6 is incorrect becausecost$based transer prices provide theadvantages o clarity and administrativeconvenience"

[1-3] Source: &I! -+ III$+2

!nswer 4!6 is incorrect because returnon assets cannot be computed or a cost

center" #he manager is not responsibleor revenue 4return6 or the assetsavailable"

!nswer 4%6 is incorrect because returnon investment cannot be computed or acost center" #he manager is notresponsible or revenue 4return6 or theassets available"

!nswer 4&6 is incorrect because thepaybac method is a means oevaluating alternative investmentproposals"

!nswer 4(6 is correct" ! cost center is

a responsibility center that isresponsible or costs only" 5 thealternatives given, variance analysis isthe only one that can be used in a costcenter" Cariance analysis involvescomparing actual costs with predictedor standard costs"

[1-] Source: &! -2+< $*+

!nswer 4!6 is incorrect because3"F results rom subtractingworing capital rom plant ande8uipment in calculating the netinvestment"

!nswer 4%6 is incorrect because**"3F ails to include averageworing capital in the total or the net


48/64

investment"

!nswer 4&6 is incorrect because1+"-,---"!dding D*,---,--- o residual incometo the imputed interest results in a targetproit o D3,>-,---" #his proit can beachieved i costs are D*,1-,---4D-,---,--- revenue $ D3,>-,---proit6"

!nswer 4%6 is incorrect becauseScenario * re8uires ma)imum costs oD*2,**-,--- to reach the target"

!nswer 4&6 is incorrect becauseScenario re8uires ma)imum costs oD*,-,--- to reach the target"

!nswer 4(6 is incorrect becauseScenario 3 re8uires ma)imum costs oD*,2--,--- to reach the target"

[1->] Source: &! -2+1 $*2

!nswer 4!6 is incorrect becausesupervisory salaries are costscontrollable by an assembly linemanager"

!nswer 4%6 is incorrect becausematerials are costs controllable by anassembly line manager"

!nswer 4&6 is incorrect becauserepairs and maintenance are costscontrollable by an assembly linemanager"

!nswer 4(6 is correct" .esponsibilityaccounting stresses that managersshould be held responsible or onlythose actors under their control" &osts

are classiied as controllable and

noncontrollable to assign responsibility,which implies that some revenues andcosts can be changed through eectivemanagement" =or e)ample, depreciationon e8uipment is ordinarily notcontrollable by the manager o anassembly line and should not appear onhisMher perormance report"

[1-+] Source: Publisher

!nswer 4!6 is incorrect because thereturn on sales was "F"

!nswer 4%6 is correct" .esidual incomeis the e)cess o the actual .5I indollars over a targeted amount e8ual toan imputed interest charge on investedcapital" #he rate used is ordinarily theweighted$average cost o capital" Someentities measure managerialperormance in terms o the amount oresidual income rather than thepercentage .5I" !ssuming theinvestment base is deined as totalassets available, &harlie's targetedamount is D-,--- 4D--,--- totalassets ) 2F cost o capital6" !ssumingthat operating income o D*,--- is the

.5I in dollars, residual income wasD4,---6" #his result is consistent withdeining the numerator o the .5Icalculation 4Income A Investment6 asoperating income" Lowever, it mightalso be deined as net proit ater ta)es4net income6" oreover, the .5Idenominator may be deined variously,e"g", total assets available, total assetsemployed, woring capital plus otherassets, or shareholders' e8uity"

!nswer 4&6 is incorrect because 2F isthe cost o capital"


D4*-,---6 assumes that .5I in dollarsis D*,--- 4operating income6 and thatthe targeted amount is D3,--- 42F )D


49/64

[11-] Source: &! Samp O$*

!nswer 4!6 is correct" #he & e8ualsrevenues minus all variable costse)pensed" ;iven no 7IP and nobeginning inished goods, the & wasD*,*-- [4D1-- $ D- $ D*- $ D1- $D1*6 ) +-- units]" #he variable costs oproducing the units not sold areincluded in ending inventory, rather thanin the &" #he i)ed costs are alsoe)cluded rom computation o the &"

!nswer 4%6 is incorrect becauseD*>,--- results rom assuming the saleo 1,--- units"

!nswer 4&6 is incorrect becauseD1,-- results rom assuming a J&o D" #his computation includes i)edunit selling costs o D but e)cludes theD1* per unit variable selling costs"

!nswer 4(6 is incorrect becauseD,--- results rom assuming a J&o D and sales o 1,--- units"


!nswer 4!6 is incorrect becauseDF is not altered becausedistributions to shareholders are notdeductible" #he air value o long$termdebt is given as D*,*--,---" #he boovalue o e8uity has to be total assetsminus total liabilities, or D64D>,>--,--- =C o e8uity6] 7!&& @ 99999999999999999999999999999999999 @-,---6 $[4-"-,-,--- is the ater$ta) operatingincome and does not deduct the cost ocapital"


!nswer 4!6 is incorrect because >F isthe pre$ta) cost o debt"

!nswer 4%6 is incorrect because >">+Fis based on the boo value o e8uity"

!nswer 4&6 is correct" #he 7!&& isan ater$ta) rate determined using theair values o the sources o long$termunds" #hus, the appropriate cost o debtis 2F ["-> ) 41"- $ "* ta) rate6]because interest is ta) deductible"Lowever, the given e8uity rate 41-F6is not adjusted because distributions toshareholders are not deductible" #heair value o long$term debt is given asD million" #he boo value o e8uity

must be D1 million 4D*- million oassets $ D< million o liabilities6, andits air value is D1 million 4D1million Q D* million6" !ccordingly, the7!&& is +F:

4"-2 ) D million =C o B# debt6 Q 41-F ) D1 million =C o e8uity6 7!&& @ 9999999999999999999999999999999999 4D million Q D1 million6 D--,--- Q D1" million @ 99999999999999999999999 D*- million @ "-+

!nswer 4(6 is incorrect because 1-F

is the cost o e8uity"


!nswer 4!6 is correct" /C! e8ualsater$ta) operating income minus theproduct o the ater$ta) 7!&& and aninvestment base e8ual to total assetsminus current liabilities" #hus, /C! isD1,>-,--- [D3 million ) 41"- $ "*6] $["-+ ater$ta) 7!&& ) 4D*- milliontotal assets $ D* million currentliabilities6]T"

!nswer 4%6 is incorrect because

D1,2*-,--- is the re8uired return on theinvestment base"

!nswer 4&6 is incorrect becauseD1,>-,--- is based on the assumptionthat D1 million is the investment base"

!nswer 4(6 is incorrect becauseD,---,--- is the ater$ta) operatingincome"

[113] Source: &! -2+< $-

!nswer 4!6 is incorrect because thislevel o cost would result in a residual

income greater than D*,---,---"

!nswer 4%6 is incorrect because thislevel o cost would result in a residual


50/64

income greater than D*,---,---"

!nswer 4&6 is correct" .esidual incomeis the e)cess o the amount o the .5Iover a targeted amount e8ual to animputed interest charge on investedcapital" I a manager has D1+,---,---o invested capital 4D1--,--- oworing capital6, a 1F imputedinterest charge e8uals D*,>-,---"!dding D*,---,--- o residual incometo the imputed interest results in a targetproit o D3,>-,---" #his proit can beachieved i costs are D*,1-,---4D-,---,--- revenue $ D3,>-,---proit6"

!nswer 4(6 is incorrect becauseD*,2+-,--- results rom subtractingworing capital rom plant ande8uipment in determining investedcapital"


!nswer 4!6 is incorrect because amanager should be motivated to e)pendthe eort re8uired to achieveorgani0ational objectives"

!nswer 4%6 is incorrect because amanager should be motivated to e)pendthe eort re8uired to achieveorgani0ational objectives"

!nswer 4&6 is correct" ! managerialcontrol system should encourage the

eicient achievement o organi0ational

objectives" #hus, goal congruence andmanagerial eort are aspects omotivation" !ll managers should bemotivated to e)pend the necessary eortto reach common goals"

!nswer 4(6 is incorrect because amanager should be motivated to e)pendthe eort re8uired to achieveorgani0ational objectives"


!nswer 4!6 is incorrect because acost$based transer price may provide

no incentive to minimi0e cost"

!nswer 4%6 is correct" I the measure othe retail store manager's perormancedoes not consider opportunity costs, ore)ample, the cost o inancinginventory, 4s6he may be tempted tomae suboptimal decisions aboutinventory levels" Lence, orderinge)cessive inventory may help tominimi0e the costs or which themanager is responsible whileincreasing the costs or which 4s6he isnot"

!nswer 4&6 is incorrect because the

organi0ation may be better served i amanager ma)imi0es an absolute dollaramount rather than a rate o return"

!nswer 4(6 is incorrect because theaccrual return on investment in the irstyears o a capital project may be verylow even though it has a positive netpresent value"

[11


51/64

!nswer 4&6 is incorrect becauseparticipatory budgeting obtains thesupport o those involved and is lielyto oster desirable behavior"

!nswer 4(6 is incorrect becausechanging budget targets as conditionschange results in setting airerperormance goals"

[1*-] Source: Publisher

!nswer 4!6 is incorrect becausedisadvantages o participatorybudgeting and standard setting includethe cost in terms o time and money"

!nswer 4%6 is incorrect because the8uality o participation is aected bythe goals, values, belies, ande)pectations o those involved"

!nswer 4&6 is incorrect because anadvantage o participatory budgeting is

that it yields inormation nown toemployees but not to management"

!nswer 4(6 is correct" Participatorybudgeting 4grass$roots budgeting6 andstandard setting use input romlower$level and middle$levelemployees" Participation encouragesemployees to have a sense o ownershipo the output o the process" #he resultis an acceptance o, and commitment to,the goals e)pressed in the budget"

[1*1] Source: &! -2+ $*2

!nswer 4!6 is incorrect becausedecentrali0ing decision$maingauthority leads to more eectivesolutions to operational problems"Solutions will come rom theindividuals with the greatest nowledgeo the operations involved"

!nswer 4%6 is incorrect because, whensegments are autonomous, othersegments are regarded as e)ternalparties, e"g", as suppliers, customers, orcompetitors"

!nswer 4&6 is incorrect becauseautonomous segments may have the

authority to compete in the samemarets"

!nswer 4(6 is correct" (ecentrali0ationis beneicial because it creates greaterresponsiveness to the needs o localcustomers, suppliers, and employees"anagers at lower levels are morenowledgeable about local marets andthe needs o customers, etc" !decentrali0ed organi0ation is also moreliely to respond le)ibly and 8uicly tochanging conditions, or e)ample, bye)pediting the introduction o newproducts" =urthermore, greater authorityenhances managerial morale and

development" (isadvantages odecentrali0ation include duplication oeort and lac o goal congruence"

[1**] Source: Publisher

!nswer 4!6 is incorrect because theyare characteristics that #heory Umanagers attribute to their employees"

!nswer 4%6 is incorrect because theyare characteristics that #heory Umanagers attribute to their employees"

!nswer 4&6 is incorrect because theyare characteristics that #heory Umanagers attribute to their employees"

!nswer 4(6 is correct" %5 managersbelieve that employees are committedto achieving objectives, woring hardto receive the rewards o achievement,and striving or sel$actuali0ation" #he%5 view is that employees enjoywor, need little supervision, seeresponsibility, and are imaginativeproblem solvers"


!nswer 4!6 is incorrect becausemultiple measures are preerable"

!nswer 4%6 is incorrect becauseobjectives should be speciic"

!nswer 4&6 is correct" %udgets andstandards are oten the result o aormal management$by$objectivesprogram" %5 is a top$down processbecause the organi0ation's objectivesare successively restated intoobjectives or each lower level"

Lowever, it is also a bottom$up processbecause o the participation osubordinates"

!nswer 4(6 is incorrect because aspeciic time period is established"

[1*3] Source: Publisher

!nswer 4!6 is incorrect because %5goals may be set in terms o 8uantitativemeasures 4such as sales dollars6 or8ualitative ones 4such as improvedservice6"

!nswer 4%6 is incorrect because itdescribes management by e)ception"

!nswer 4&6 is correct" #he hallmar o%5 is the mutual setting o goals bythe superior and the subordinate as abasis or perormance evaluation"%ased on the #heory G philosophy thatemployees want to wor hard i theynow what is e)pected, %5 re8uirestop management participation andcommitment to the program, integrationo the objectives or all subunits into acompatible system directed towardaccomplishment o overall goals,provision or regular reporting o

perormance, and ree and honestcommunication between superior andsubordinates" Subordinates must maecareul assessments o their abilities


52/64

and their interests, and managers mustcoach subordinates rather than dictatetheir proper goals" %oth sides mustmaintain le)ibility to accommodateunoreseen changes, and the review andanalysis o results beore setting thene)t round o goals is a vital part o theprocess"

!nswer 4(6 is incorrect because goalsetting should be participative"


!nswer 4!6 is incorrect because, whenan employee believes that 4s6he is incontrol, 4s6he eels more responsibleor achieving goals"

!nswer 4%6 is correct" %5 is theprocess by which a manager and hisMhersubordinate4s6 wor together toormulate the objectives and goals othe subordinate4s6" 5ne o the

weanesses o %5 is that emphasis on8uantitative actors may causeemployees to ocus on ends rather thanmeans" #hus, %5 may jeopardi0e the8uality o the organi0ation's output"

!nswer 4&6 is incorrect becauseemployee participation in goal settinghelps clariy goals and motivate theemployee"

!nswer 4(6 is incorrect because anemployee's trust in the team approachhelps mae the wor atmosphere morepositive"

[1*2] Source: Publisher

!nswer 4!6 is incorrect because maretshare is an e)ternal noninancialmeasure"

!nswer 4%6 is incorrect becausedelivery perormance is an e)ternalnoninancial measure"

!nswer 4&6 is incorrect becausecustomer satisaction is an e)ternalnoninancial measure"

!nswer 4(6 is correct" =eedbac

regarding managerial perormance maytae the orm o inancial andnoninancial measures that may beinternally or e)ternally generated"oreover, dierent measures have along$term or short$term emphasis"/)amples o internal noninancialmeasures are product 8uality, newproduct development time, andmanuacturing lead time 4cycle time6"

[1*


53/64

responsibility to proits as well as costswithout changing hisMher level ocontrol, the organi0ation may encouragedesirable behavior congruent withoverall goals, such as improvedcoordination with mareting personnel"

!nswer 4%6 is incorrect because thepotential or avorable behavioralchange may justiy assigningresponsibility without control"

!nswer 4&6 is incorrect because iresponsibility e)ceeds the e)tent towhich a manager can inluence anactivity, the result may be reducedmorale, a decline in managerial eort,and poor perormance"

!nswer 4(6 is incorrect because iresponsibility e)ceeds the e)tent towhich a manager can inluence anactivity, the result may be reducedmorale"

[1-] Source: Publisher

!nswer 4!6 is incorrect because directcosts can be traced to a particular costobject in an economically easiblemanner"

!nswer 4%6 is incorrect because currentcost is an attribute used to measureassets"

!nswer 4&6 is incorrect becausecontrollable costs can be inluenced bya particular manager"

!nswer 4(6 is correct" &ommon costsare the cost o products, activities,acilities, services, or operationsshared by two or more cost objects"#hey are indirect costs because theycannot be traced to a particular costobject in an economically easiblemanner" Lence, they must be allocated"


!nswer 4!6 is correct" #he diicultywith common costs is that they areindirect costs whose allocation may bearbitrary" ! direct cause$and$eect

relationship between a common costand the actions o the cost object towhich it is allocated is desirable" Sucha relationship promotes acceptance othe allocation by managers whoperceive the airness o the procedure,but identiication o cause and eectmay not be easible"

!nswer 4%6 is incorrect becauseallocation using an ability$to$bearcriterion punishes successul managersand rewards underachievers"

!nswer 4&6 is incorrect becauseairness is an objective rather than a

criterion" oreover, airness may beinterpreted dierently by dierentmanagers"

!nswer 4(6 is incorrect because thebeneits$received criterion is preerablewhen a cause$eect relationship cannotbe easibly identiied"


!nswer 4!6 is incorrect because anarbitrary allocation may sew operatingresults"

!nswer 4%6 is incorrect because theallocation may create resentment andconlict"

!ns

behavioural issues

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