Chapter 10_ Performance Measurement in Decentralized Organizations
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1/
A
n organization in which decision-making authority is spread throughout the organization is
-decentralized
2/Operations are able to respond quickly to customers and changes in the environment in a decentralized organization because
-there are fewer managers that must be consulted before a decision is made
3/Which of the following is not one of the three primary types of responsibility centers?
-
sales
4/Managers of cost centers are expected to ______.
-
minimize costs, while providing an acceptable level of service
5/Return on investment = ______.
Net operating income ÷ Average operating assets
6/
True or false: In strongly decentralized organizations, even the lowest-level managers can make decisions.
True 7/
Net operating income is income before
and
.
-interest
-
taxes
or
tax
8/
Lower-level managers are empowered to make decisions in a ______ organization, which can ________ motivation and job satisfaction.
decentralized, increase
9/Which of the following ratios are part of the ROI formula?
Sales ÷ Average operating assets
Net operating income ÷ Sales
10/
Any part of an organization whose manager has control over and is accountable for all three centers (cost, profit, or investments) is a(n)
center.
-
responsibility
11/
Garnett, Inc. has a required rate of return on new projects of 12%. The Western division of Garnett is currently earning a combined return on investment (ROI) of 14.5% on the projects in its division. Western's manager is considering a project that is projected to earn 13.25%. Which of the following statements regarding the manager's decision are correct?
-
The manager may decide to reject the project because it will lower the current ROI earned by his division.
- the project is in the best interest of the company as a whole.
12.
Which of the following business segments would
not
be considered a cost center?
-Retail outlet
13/
The net operating income that an investment center earns above the minimum required return on its operating assets is its
-
Residual
14/
Net operating income ÷ Average operating assets = ______.
-
Return on investment
15/
EBIT is another term for
Blank
_____
-net operating income
16/Which of the following statements is
correct
?
-
A manager might reject a proposal using ROI that the manager would accept using residual income.
17/ROI can be calculated as ______.
-
margin × turnover
-net operating income ÷ average operating assets
18/
Valid criticisms of evaluating performance based on return on investment (ROI) include managers may
-be put in charge of a business segment that includes committed costs over which a manager has no control
-reject investment opportunities that are profitable for the company but have a negative impact on a manager's ROI
- actions that increase ROI in the short-run at the expense of long-term performance
19/
Net operating income - (Average operating assets × Minimum required rate of return) -
residual income
20/
The inability to compare divisions of different sizes is a major disadvantage of ______.
-
residual income only
21/The period from which a product begins production as raw materials and ends as a finished product is known as
time or manufacturing cycle time.
(
-
throughput
22/
When managers are evaluated on residual income, rather than on return on investment (ROI), they will be
Blank
______
likely to pursue projects that will benefit the entire company.
More 23/The elapsed time from when a customer order is received until the finished goods are shipped is known as the
-
Delivery
- Cycle -Time
24/
Quick to Ship Company has a process time of 2 days and a throughput time of 8 days. The manufacturing cycle efficiency is
25Which of the following statements is
not
a weakness of using return on investment (ROI) to evaluate performance?
-ROI does not include the investment in nonoperating assets, such as land held for investment or stock in other companies.
26/An integrated set of performance measures that are derived from the company's strategy is
-a balanced scorecard
27/A disadvantage of the residual income approach is that it ______.
-
cannot be used to evaluate different sized divisions
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is about raw materials necessary in the
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