Acct 202H Chapter 10 – Flashcards
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A performance evaluation system that integrates financial and operational performance measures along four perspectives: Financial, Customer, Internal Business, Learning and Growth
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Balanced Scorecard
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Sales revenue divided by total assets. Shows how much sales revenue is generated with every $1 of assets Sales / Total assets
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Capital Turnover
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Fixed expenses that cannot be traced to the segment
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Common Fixed Expenditures
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A responsibility center in which managers are responsible for controlling costs
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Cost Center
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A process where companies split their operations into different operating segments
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Decentralize
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Fixed expenses that can be traced to the segment
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Direct Fixed Expenses
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A variance that causes operating income to be higher than budgeted
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Favorable Variance
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A summarized budget prepared for different levels of volume
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Flexible Budget
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The difference between the flexible budget and actual results. Variances are due to something other than volume
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Flexible Budget Variance
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When the goals of the segment managers align with the goals of top managment
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Goal Congruence
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Historical cost of assets
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Gross Book Value
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A responsibility center in which managers are responsible for generating revenues, controlling costs, and managing the division's assets.
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Investment Center
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Summary performance metrics used to assess how well a company is achieving its goals
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Key Performance Indicators
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Performances indicators that reveal the results of past actions and decisions
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Lag Indicators
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Performance measures that predict future performance
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Lead Indicators
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A management technique in which managers only investigate budget variances that are relatively large
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Management by Exception
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The difference between actual results and the master budget
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Master Budget Variance
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Historical cost of assets less accumulated depreciation
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Net Book Value
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Reports that compare actual results against budgeted figures
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Performance Reports
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A report displaying the measurement of KPIs, as well as their short-term and long-term targets
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Performance Scorecard or Dasboard
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A responsibility center in which managers are responsible for both revenues and costs, and therefore profits
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Profit Center
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Operating income minus the minimum acceptable operating income given the size of the division's assets. RI = Operating income - (Total Assets X Target Rate of Return)
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Residual Income
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A system for evaluating the performance of each responsibility center and its manager
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Responsibility Accounting
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A part of an organization whose manager is accountable for planning and controlling certain activities 1. Cost 2. Revenue 3. Profit 4. Investment
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Responsibility Center
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Operating income divided by total assets. Measures the profitability of a division relative to the size of its assets. ROI = Operating Income/Total Assets Expanded ROI = (Operating Income/Sales) X (Sales/Total Assets)
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Return on Investment
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A responsibility center in which managers are responsible for generating revenue
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Revenue Center
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Operating income divided by sales revenue. Shows how much income is generated for every $1 of assets
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Sales Margin
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The operating income generated by a profit or investment center before subtracting the common fixed costs that have been allocated to the center
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Segment Margin
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The price charged for the internal sale of product between two different divisions of the same company
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Transfer Price
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A variance that causes operating income to be lower than budgeted
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Unfavorable Variance
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The difference between an actual amount and the budget
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Variance
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The acquisition of companies within one's supply chain
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Vertical Integration
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The difference between the master budget and the flexible budget. Arises only because the actual sales volume differs from the volume originally anticipated in the master budget
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Volume Variance
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Geographic area, product line, and customer base
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How Companies Decentralize
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Use of expert knowledge, improved customer relations, frees top management's time______ Achieves goal congruence_______
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Advantages/Disadvantages of Decentralization
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A large corporate division
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Investment Center
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Which of the following is true: a. Favorable variances should always be interpreted as "good news" for the company b. Unfavorable variances should always be interpreted as "bad news" for the company c. Favorable variances are variances that cause operating income to be higher than budgeted d. Management by exception means that mangers investigate all unfavorable variances but not all favorable variances
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C. Favorable Variances are variances that cause operating income to be higher than budgeted
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A segment margin is the operating income generated by subtracting...
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...Only direct fixed expenses from a segment's contribution margin
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Not a valid strategy for determining a transfer price
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Using the price set by GAAP
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Which of the following is false? a. The difference between actual results and the master budget is called the master budget variance b. The volume variance is due to causes other than volume c. The flexible budget is prepared using the actual volume achieved during the period d. The master budget variance can be split into two components: a volume variance and flexible budget variance
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b. The volume variance is due to causes other than volume
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Number of new products developed is a KPI for which perspective?
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Internal Business
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Hours of employee training would be a KPI for which perspective?
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Learning and Growth
