Divisional Performance (1)

Question 1

What is divisionalisation a term for?

Answer 1

Separation of an organisaiton into divisions

Question 2

What can a division represent?

Answer 2

A cost centre, profit centre an investment centre

Question 3

A company with several divisions?

Answer 3

A decentralised organisation

Question 4

Advantage of decentralisation (quickly)

Answer 4

Decisions made more quickly

Question 5

Advantage of decentralisation (motivation)

Answer 5

Increased motivation of management

Question 6

Advantage of decentralisation (quality)

Answer 6

Increased quality of decisions due to local knowledge

Question 7

Advantage of decentralisation (bureaucracy)

Answer 7

Reduced head office bureaucracy

Question 8

Advantage of decentralisation (management)

Answer 8

Better training for all levels of management

Question 9

A good performance measure should include (goal congruence)

Answer 9

Provide incentive to divisional manager to make decisions which are in the best interests of the overall company

Question 10

A good performance measure should include (accountable)

Answer 10

Only include factors for which the manager can be held accountable

Question 11

A good performance measure should include (objectives)

Answer 11

Recognise the long-term objectives as well as short-term objectives of organisation

Question 12

Manager’s area of responsibility and typical financial performance measure (cost centre)

Answer 12

Decisions over costs

Standard costing variance

Question 13

Manager’s area of responsibility and typical financial performance measure (revenue centre)

Answer 13

Revenues only

Revenues

Question 14

Manager’s area of responsibility and typical financial performance measure (profit centre)

Answer 14

Decisions over costs and revenues

Controllable profit

Question 15

Manager’s area of responsibility and typical financial performance measure (investment centre)

Answer 15

Decisions over costs, revenues and assets

ROI and residual income

Question 16

How is the performance of an investment centre usually monitored?

Answer 16

Either ROI and RI

Question 17

What does ROI show?

Answer 17

How much profit has been made in relation to amount of capital invested and calculated as (profit/capital employed) * 100%

Question 18

What should profit be in ROI calculation?

Answer 18

PBIT

Question 19

What should investment be in ROI calculation?

Answer 19

Use book value of total assets less current liabilities

Question 20

What does ROI enable?

Answer 20

Performance in different divisions to be compared

Question 21

Whcih projects in ROI should be undertaken?

Answer 21

Only projects which increase existing ROI