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1. Which of the following business unit performance measures could be appropriately used to evaluate a cost center?

A) Return on investment (ROI)

B) Residual income

C) Economic value added (EVA)

D) Any of the above

E) None of the above

2. Which of the following statements does not represent a limitation of using return on investment (ROI) for measuring and evaluating performance?

A) ROI uses accounting income which is based on historical costs.

B) ROI cannot be used to compare divisions of different sizes.

C) ROI has the potential to create goal congruence problems.

D) ROI fails to align some costs incurred in one period with the benefits received in another period.

3. Part of the using the economic value added (EVA) measure in evaluating business unit performance is the adjustment of various items to eliminate accounting distortions. Which of the following is NOT an item commonly adjusted in this process?

A) common stock

B) current liabilities

C) patent amortization

D) advertising expenditures

E) research & development costs

4. Of the following choices, which one would be the best transfer price to use between responsibility centers when market prices are not available?

A) Actual variable cost

B) Standard variable cost

C) Actual full absorption cost

D) Standard full absorption cost

5. The fixed overhead production volume variance is computed by the difference between the:

A) actual fixed overhead and applied fixed overhead.

B) actual fixed overhead and budget at the actual level of activity reached.

C) actual fixed overhead and budget at the denominator level of activity planned.

D) budget at actual levels of activity reached and fixed overhead applied.

6. It was recently discovered at Manzana Food Corporation that the machine filters used in the extruding machine can also be used as baby diapers. Because of this, an excessive amount of filters have been used in (or stolen from!) the factory. This excessive usage will show up as part of the:

A) variable overhead price variance.

B) variable overhead efficiency variance.

C) fixed overhead price variance.

D) fixed overhead production volume variance.

7. Which of these variances is least significant for cost control?

A) labor price variance

B) material quantity variance

C) fixed overhead price variance

D) fixed overhead production volume variance

E) labor efficiency variance

8. Functional performance measures differ from customer satisfaction performance measures in that they are used primarily to evaluate:

A) internal processes.

B) external processes.

C) benchmark processes.

D) continuous improvement processes.

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