ACCT 6302 FINAL EXAM

• Accounting
• Year 4

ACCT 6302 FINAL EXAM

Welcome to Final Exam Review for ACCT 6302

Let's do amazing on this exam!!

- Prof Lizzy

Which compensation is generally paid currently?

1. Benefits and bonus
2. Salary and bonus
3. Bonus and stock options
4. Salary and benefits

Which compensation is generally paid currently?

Management Compensation Plans: Policies and procedures for compensating managers. Compensation can be paid currently (usually an annual amount paid monthly, twice a month, or weekly) or deferred to future years. Salary and benefits are typically awarded currently; bonuses are either paid currently or deferred, though a wide variety of plans are observed in practice. NOTE*: Stock options would not be an example of a perk that firms typically provide to employees to enhance motivation.  

The balanced scorecard measures the strategic business unit (SBU)'s performance in all of the following areas except:

1. Managerial performance
2. Learning and growth
3. Accounting and tax compliance
4. Customer satisfaction

The balanced scorecard measures the strategic business unit (SBU)'s performance in all of the following areas except:

Balanced Scorecard for SBU: The four measures of the balanced scorecard for SBU are Learning and Growth, Managerial performance, Customer Satisfaction, Internal Business Processes.  

Controllable margin is determined by subtracting short-term controllable fixed costs from the:

1. Fixed costs
2. Contribution margin
3. Variable costs
4. Variable and fixed costs

Controllable margin is determined by subtracting short-term controllable fixed costs from the:

Controllable Margin: the excess of contribution margin over controllable fixed costs. In other words, is determined by subtracting short-term controllable fixed costs from the

contribution margin. Managerially it is that margin that you can reasonably expect from a process that is balanced and controlled. 

Return on sales (ROS) multiplied by asset turnover (AT) equals what?

1. Residual income (RI)
2. Return on investment (ROI)
3. Return on assets (ROA)
4. Return on equity (ROE)

Return on sales (ROS) multiplied by asset turnover (AT) equals what?

Return On Sales (ROS): The amount of profit per sales dollar; measures the manager’s ability to control expenses and increase revenues to improve profitability. In other words, Return on Sales (ROS) multiplied by Asset Turnover (AT) equals ROI.  

The evaluation by upper-level managers of the performance of mid-level managers is:

1. Management control
2. Performance evaluation
3. Operational control
4. Goal congruence

The evaluation by upper-level managers of the performance of mid-level managers is:

Management control: The system used by upper-level managers to evaluate the performance of mid-level managers.

Managers who are risk averse:

1. Seek to avoid options with low risk and would choose an option with higher expected value if it had more risk.
2. Seek to accept options with low risk and would choose an option with lower expected value if it had more risk.
3. Seek to avoid options with high risk and would choose an option with lower expected value if it had less risk.
4. Seek to accept options with high risk and would choose an option with lower expected value if it had less risk.

Managers who are risk averse:

A Risk-averse Manager: is biased against decisions that have an uncertain outcome, even if the expected outcome is favorable. NOTE*: A risk-averse manager also seeks to avoid options with high risk and would choose an option with lower expected value if it had less risk. 

What is the manager of a profit center not responsible for?

1. Costs
2. Revenues
3. Operating profit
4. Invested capital

What is the manager of a profit center not responsible for?

Profit Center: A business unit whose manager is responsible for revenues and expenses, but not the level of invested capital, in the unit.

Assume that an organization's weighted-average cost of capital (minimum rate of return) is 8% and that Division A currently has a 12% return on investment (ROl). The manager of Department A, who is evaluated on the basis of divisional ROl, would most likely accept an investment that is expected to return:

1. More than 8%
2. More than 12%
3. More than 8% but less than 12%
4. Less than 12%

Assume that an organization's weighted-average cost of capital (minimum rate of return) is 8% and that Division A currently has a 12% return on investment (ROl). The manager of Department A, who is evaluated on the basis of divisional ROl, would most likely accept an investment that is expected to return:

Return on investment (ROI): A measure of profit divided by a measure of investment in a business unit. NOTE*: A company will invest in an ROI if its ROI is higher than the suggested

ROI, and a company will be indifferent if it has the same ROI as the suggested ROI. 

A unit of an organization is referred to as an investment center if it has:

1. Authority to make decisions over the most significant costs of operations, including the power to choose the sources of supply.
2. Authority to make decisions affecting the major determinants of profit, including the power to choose its markets and sources of supply.
3. Authority to make decisions affecting the major determinants of profit, including the power to choose its markets and sources of supply and significant control over the amount of invested capital.
4. Authority to provide specialized support to other units within the organization.

A unit of an organization is referred to as an investment center if it has:

Investment Center: A business unit that includes in its financial-performance metric the level of assets (capital) employed by the unit as well as profit generated by that unit.

NOTE*: They also have the authority to make decisions affecting the major determinants of profit, including the power to choose its markets and sources of supply and significant

control over the amount of invested capital.

Return on investment (ROl) can be directly increased by:

1. Decreasing operating assets
2. Decreasing asset turnover (AT)
3. Decreasing operating income
4. Increasing sales

Return on investment (ROl) can be directly increased by:

ROI can be directly increased by decreasing operating assets. 

The receivables turnover ratio is a measure of:

1. Leverage
2. Profitability
3. Sales performance
4. Liquidity

The receivables turnover ratio is a measure of:

Receivables Turnover: The Receivables Turnover Ratio is a measure of liquidity.  

Since residual income (RI) is not a percentage, it is not very useful for:

1. Comparing business units of significantly different size.
2. Evaluating the performance of subunits with high ROls.
3. Evaluating the short-term financial performance of larger divisions.
4. Evaluating the short-term financial performance of small divisions.

Since residual income (RI) is not a percentage, it is not very useful for:

Residual Income (RI): A dollar amount equal to the income of a business unit less an imputed charge for the level of investment in the division. RI does have the advantage of motivating a business unit to pursue an investment opportunity as long as the investment’s expected return exceeds the minimum return set by the firm. Being that RI is expressed as a percentage it is not very useful for comparing business units of significantly different size.