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Responsibility Accounting MC Questions

Provided by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida

Responsibility Acct Main Page | Responsibility Acct Discussion Questions | Grad MA Course

1. Which of the following can be delegated?

a. responsibility.
b. authority.
c. accountability.
d. a and b.
e. a., b. and c.

2. Which of the following types of organizations provide the best indicator of decentralization?

a. A company is organized into revenue centers.
b. A company is organized into cost centers.
c. A company is organized into profit centers.
d. A company is organized into investment centers.
e. A company organized into responsibility centers.

3. Economic value added, or residual income is a measurement mainly used to evaluate

a. revenue centers.
b. cost centers.
c. profit centers.
d. investment centers.
e. responsibility centers.

4. Which concept (or concepts) listed below is (are) consistent with traditional responsibility accounting?

a. vertical structure.
b. cross functional measurements.
c. bottom up control.
d. a and b.
e. a and c.

5. In relation to the responsibility accounting controversy, goal displacement means

a. assigning responsibility for profits rather than revenue and costs.
b. assigning responsibility for financial results rather than activities and processes.
c. assigning responsibility to individuals rather than groups.
d. assigning functional responsibility rather than cross functional responsibility.
e. none of the above.

6. According to C. J. McNair, reward systems should change to emphasize

a. salary increases based on individual performance.
b. salary increases based on responsibility center performance.
c. base pay plus bonuses based on individual performance.
d. base pay plus bonuses based on team performance.
e. none of these.

7. C. J. McNair’s concept of activity based responsibility accounting emphasizes

a. interdependence, outcomes, individuals, and cost control.
b. interdependence, processes, individuals, and activities.
c. interdependence, processes, the organization, and activities.
d. independence, outcomes, the organization and cost control.
e. none of these.

8. Decomposing, or separating, ROI into two parts provides the

a. return on investment ratio and residual income ratio.
b. net income to investment ratio and sales dollars to costs ratio.
c. sales to net income ratio and investment to net income ratio.
d. sales to investment ratio and net income to sales ratio.
e. none of these.

9. Which investment basis (or bases) for the ROI calculation tend (or tends) to cause managers to dispose of assets too soon?

a. gross book value.
b. net book value.
c. replacement costs.
d. a and b.
e. none of these.

10. Which investment basis (or bases) for the ROI calculation tend (or tends) to cause managers to keep assets too long?

a. gross book value.
b. net book value.
c. replacement costs.
d. a and b.
e. none of these.

11. Residual income is

a. income based on compound or annuity depreciation.
b. income after subtracting interest on long term debt.
c. income after subtracting depreciation. d. income after adjusting assets to current value.
e. income after subtracting a minimum desired amount of income.

12. Which measurement (or measurements) below would tend to favor large divisions over small divisions if the divisions were ranked?

a. Return on investment.
b. Residual income.
c. Net income.
d. a and b.
e. b and c.

13. The main argument for the use of residual income (RI) as a measure of performance for investment centers, as opposed to the ROI, is that

a. RI will not cause managers to reject investment alternatives that generate a return greater than the cost of capital, but lower than the divisions average ROI.
b. RI is a more equitable way to compare different size divisions and different aged divisions.
c. since RI is an absolute amount, rather than a percentage, the problems associated with choosing a denominator (gross book value or net book value etc.) are eliminated.
d. RI is simply easier to calculate than ROI.
e. None of these.

14. An underlying concept of budgeting and standard cost systems is

a. the concept of statistical control limits.
b. the concept of continuous improvement.
c. the concept of quality at the source.
d. the concept of responsibility accounting.
e. the concept of employee empowerment.

15. Standard cost variances are frequently used to evaluate cost centers. Which of these variances are compatible with lean enterprise concepts?

a. Direct material and direct labor price and quantity variances.
b. Variable overhead spending and efficiency variances.
c. Fixed overhead spending and production volume variances.
d. a and b.
e. None of the above.

16. When using a standard cost system, which of the following is not a potential behavioral problem associated with using material price variances as a single basis for evaluating the purchasing department?

a. Buying larger quantities of materials than needed.
b. Buying lower quality materials than standard.
c. Using less quantity than needed in the production process.
d. Using too many vendors or suppliers.
e. Failure to investigate and determine vendor product quality before purchasing.

17. From the statistical control perspective, what is the greatest deficiency associated with the standard cost control methodology?

a. Standard cost control does not include the statistical concept of variability.
b. Standard cost variances include too much aggregation.
c. Standard cost variances include product cost distortions and cross subsidies.
d. Standard cost control is a constrained optimization technique.
e. None of these.

18. Which type of responsibility center has the greatest amount of autonomy?

a. a revenue center.
b. a cost center.
c. a profit center.
d. an investment center.
e. none of these.

19. Which of the following represent arguments against traditional responsibility accounting?

a. It tends to promote competition between segments of a company.
b. It tends to promote subsystem, or local optimization.
c. It tends to ignore many of the interdependencies within an organization.
d. a and b.
e. All of the above.

20. Which of the following characteristics is not associated with traditional responsibility accounting?

a. Assumes optimization of the parts will optimize the whole.
b. Assumes independence of the parts.
c. Places emphasis on the performance of individuals.
d. Attempts to control processes.
e. Focuses on financial outcomes.

21. The characteristics of traditional responsibility accounting include

a. a vertical organizational structure.
b. a horizontal organizational structure.
c. a network organizational structure.
d. none of the above.

22. The characteristics of a responsibility system for a JIT, or lean organization include

a. competition between subsystems.
b. independence of subsystems.
c. cross functional measurements.
d. a and b.
e. a and c.

23. Control systems in traditional responsibility accounting are

a. based on the bottom up concept.
b. based on the top down concept.
c. based on cooperation.
d. a. and c.
e. b. and c.

24. Goal displacement refers to a situation where

a. there are too many measurements.
b. activities are emphasized rather than costs.
c. costs are emphasized rather than activities.
d. a. and b.
e. a and c.

25. Which of the following support the traditional responsibility concept?

a. W. Edwards Deming.
b. Eli Goldratt.
c. Peter Senge.
d. H. Thomas Johnson.
e. none of the above.

26. The controllability concept refers to

a. measurements of cross functional responsibility.
b. measurements within the control of individuals.
c. measurements within statistical control limits.
d. a. and b.
e. b. and c.

27. In his article "The third wave breaks on the shores of accounting", Robert Elliott advocated which type of organizational structure?

a. vertical.
b. stovepipe.
c. network.
d. top down.
e. none of these.

28. C. J. McNair has argued that emphasis should be placed on which of the following?

a. processes rather than outcomes.
b. improvement rather than accountability.
c. activities rather than costs.
d. a. and b.
e. all of the above.

Responsibility Accounting MC Solution