Responsibility Accounting and Performance Measures Paper 1

1

Fairmount, Inc., uses an accounting system that charges costs to the manager who has been delegated the authority to make the decisions incurring the costs. For example, if the sales manager accepts a rush order that will result in higher-than-normal manufacturing costs, these additional costs are charged to the sales manager because the authority to accept or decline the rush order was given to the sales manager. This type of accounting system is known as






2

The basic purpose of a responsibility accounting system is






3

In responsibility accounting, a center’s performance is measured by controllable costs. Controllable costs arebest described as including






4

A segment of an organization is referred to as a service center if it has






5

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






6

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






7

Decentralized firms can delegate authority and yet retain control and monitor managers’ performance by structuring the organization into responsibility centers. Which one of the following organizational segments is most like an independent business?






8

A successful responsibility accounting reporting system is dependent upon






9

Sherman Company uses a performance reporting system that reflects the company’s decentralization of decision making. The departmental performance report shows one line of data for each subordinate who reports to the group vice president. The data presented show the actual costs incurred during the period, the budgeted costs, and all variances from budget for that subordinate’s department. Sherman is using a type of system called






10

Micro Manufacturers uses an accounting system that charges costs to the manager who has been delegated the authority to make the decisions incurring the costs. For example, if the sales manager accepts a rush order that requires the incurrence of additional manufacturing costs, these additional costs are charged to the sales manager because the authority to accept or decline the rush order was given to the sales manager. This type of accounting system is known as






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