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Management Accounting

Willie Seal, University of Essex, UK
Ray Garrison, Brigham Young University, Provo, Utah, USA
Eric Noreen, INSEAD, France

Segment Reporting and Decentralization

Self-test Questions


1	Which of the following statements is untrue? (Learning Objective 1 Ch 15)
		A)	A Profit Centre manager has less responsibility than an Investment Centre manager
		B)	A Cost Centre manager has less responsibility than a Profit Centre manager
		C)	An Investment Centre manager has control over selling prices
		D)	A Cost Centre manager has control over selling prices


2	Which of the following are not disadvantages of decentralisation (Learning Objective 1 Ch 15)
		A)	Top management spend more time on strategy rather than on the day to day running of the business.
		B)	Lower level managers making decisions without understanding the big picture
		C)	Too much competition between segment/department managers can harm the organisation
		D)	There may be a lack of coordination due to managers pursuing their own goals


3	Which of the following is untrue? (Learning Objective 2 Ch 15)
		A)	Traceable fixed costs are costs that can be traced to a particular segment
		B)	Common fixed costs should be apportioned between segments for control purposes
		C)	Common fixed costs are costs that are shared between segments
		D)	Traceable Costs may became Common Costs depending on the segment chosen for the analysis


4	One of the following does not hinder proper cost assignment (Learning Objective 3 Ch 15)
		A)	The inclusion of non-production costs in each segment
		B)	The assignment of common costs between segments
		C)	Omission of some costs in the assignment process
		D)	The use of inappropriate methods for apportioning costs between segments


5	The Return on Investment Formula (ROI) is (Learning Objective 4 Ch 15)
		A)	Average Operating Assets/ Gross Operating Profit
		B)	Net Operating Profit/ Average Operating Assets
		C)	Average Operating Assets/ Net Operating Profit
		D)	Gross Operating Profit/ Average Operating Assets


6	One of the following illustrates a way that an Investment Centre manager cannot increase his/her ROI (Learning Objective 5 Ch 15)
		A)	Reduce Assets
		B)	Reduce Expenses
		C)	Increase Sales
		D)	Increase Depreciation


7	One of the following is not a disadvantage of ROI (Learning Objective 5 Ch 15)
		A)	Profitable investments may be rejected
		B)	Managers may not know how to increase ROI
		C)	Committed costs may not be relevant to manager performance measure
		D)	The use of the Balanced Scorecard


8	The formula for calculating Residual Income is (Learning Objective 6&7 Ch 15)
		A)	Net Operating Profit/ All assets
		B)	All assets/ Net Operating Profit
		C)	Net Operating Profit less charge on operating assets
		D)	Charge on Operating Assets plus Net Operating Profit

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