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Cost Accounting 101 Practice Test: Performance Measurement, Compensation and Multinational Operations
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Performance measurement is a systematic process for evaluating the effectiveness and efficiency of projects, programs, and initiatives. It can also be used to motivate managers to make decisions that benefit the company and themselves.  Performance measurement is used to evaluate employee performance. This evaluation is then used to determine the amount of variable monetary compensation an employee will receive and for making career decisions.  When managers are compensated based on performance measures, they will need to be compensated for taking on extra risk. Performance-based incentives... Show more
Cost Accounting 101 Practice Test: Performance Measurement, Compensation and Multinational Operations
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25 Questions

1. Return on investment can be increased by:
2. The situation in which an employee prefers to exert less effort compared with the effort desired by the owner because the employee's effort CANNOT accurately be monitored and enforced is known as a(n):
3. Which of the following is the correct formula for return on sales?
4. An important consideration in designing compensation arrangements is the tradeoff between creating incentives and imposing risks.
5. In an Economic Value Added calculation, the measure of the invested capital for a division would be that division's assets minus that division's liabilities.
6. Designers of executive compensation plans emphasize which of the following factors?
7. The return on investment is usually considered the most popular approach to incorporating the investment base into a performance measure because:
8. Goal congruence is more likely to be promoted by using return on investment rather than residual income as a measure of a subunit's managerial performance.
9. The cost today of purchasing an asset identical to the one currently held is called a(n):
10. Return on investment is also called the accrual accounting rate of return.
11. Imputed costs are costs recognized in particular situations that are NOT usually recognized by accrual accounting procedures.
12. After-tax operating income minus the after-tax weighted-average cost of capital multiplied by total assets minus current liabilities equals:
13. Should assets be defined as total assets or net assets? This question is considered part of which step in designing an accounting-based performance measure?
14. The after-tax average cost of all the long-term funds used by a corporation equals:
15. Another name for return on investment is the:
16. Customer-satisfaction measures are an example of the:
17. Managers only employ one task as a part of their job, and thus evaluation of how well they do is simple to accomplish.
18. A company which favors the residual income approach wants managers to:
19. Another term for benchmarking is a relative performance evaluation.
20. Does operating income best measure a subunit's financial performance? This question is considered part of which step in designing an accounting-based performance measure?
21. The residual income method is the most popular performance measure when measuring performance in an investment center.
22. Companies that adopt the Economic Value Added concept define investment as total assets employed minus current liabilities.
23. Economic value added, unlike residual income, charges managers for the costs of their investments in long-term assets and working capital.
24. The three alternatives for increasing return on investment include increasing assets such as receivables, increasing revenues, and decreasing costs. (In all cases assume that all other items stay the same.)
25. Investment turnover is calculated as revenue divided by investment.

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