ch.15(1.6.7)

Question 1

Practice of delegating authority and responsibility for the operation of business segments.

Answer 1

decentralization

Question 2

Point in an organization where the control over revenue or expense items is located.

Answer 2

responsibility center

Question 3

Type of responsibility center that incurs costs but does not generate revenue.

Answer 3

cost center

Question 4

Type of responsibility center for which both revenues and costs can be indentified.

Answer 4

profit center

Question 5

Type of responsibility center for which revenue, expense and capital investments can be measured.

Answer 5

investment center

Question 6

Evaluating managerial performance based only on revenue and costs under the manager’s direct control.

Answer 6

controllability concept

Question 7

Measure of profitability based on the asset base of the firm. It is calculated as net income divided by average total assets. ROI is a product of net margin and asset turnover.

Answer 7

return on investment (ROI)

Question 8

Component in the determination of the return on investment. Computed by dividing operating income by sales.

Answer 8

margin

Question 9

Component in the determination of the return on investment. Computed by dividing sales by operating assets.

Answer 9

turnover

Question 10

Situation in which managers act in their own self-interests even though the organization as a whole suffers.

Answer 10

suboptimization

Question 11

Approach that evaluates managers on their ability to maximize the dollar value of earnings above some targeted level of earnings.

Answer 11

residual income