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Chapter 10 Performance Measurement in Decentralized Organizations questions with answers.
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Chapter 10 Performance Measurement inDecentralized Organizations questions
with answers.
True or false: In strongly decentralized organizations, even the lowest-level managers can make
decisions. ANS -True
Reason:
Decentralized operations often allow the lower-levels of management to make decisions because they
are most familiar with the day-to-day operations.
Lower-level managers are empowered to make decisions in a ______ organization, which can ________
motivation and job satisfaction. ANS -decentralized, increase
Which of the following is not one of the three primary types of responsibility centers? ANS -sales
The manager of a(n) ______ center does not have control over revenue or the use of investment funds.
ANS -cost
Net operating income ÷ Average operating assets = ANS -Return on investment
An organization in which decision-making authority is spread throughout the organization is ______.
ANS -decentralized
Net operating income is income before ______ and ______. ANS -interest , taxes
Operations are able to respond quickly to customers and changes in the environment in a decentralized
organization because ______. ANS -there are fewer managers that must be consulted before a decision
is made
Which of the following ratios are part of the ROI formula? ANS -Net operating income ÷ Sales
, Sales ÷ Average operating assets
Any part of an organization whose manager has control over and is accountable for cost, profit, or
investments is a(n) ______________ center. ANS -responsibility
Valid criticisms of evaluating performance based on return on investment (ROI) include managers may
______. ANS -be put in charge of a business segment that includes committed costs over which a
manager has no control
reject investment opportunities that are profitable for the company but have a negative impact on a
manager's ROI
take actions that increase ROI in the short-run at the expense of long-term performance
Managers of cost centers are expected to ______. ANS -minimize costs, while providing an acceptable
level of service
Return on investment = ANS -Net operating income ÷ Average operating assets
Net operating income - (Average operating assets × Minimum required rate of return) = ANS -residual
income
EBIT is another term for ______. ANS -net operating income
Which of the following statements is correct? ANS -A manager might reject a proposal using ROI that
the manager would accept using residual income.
ROI can be calculated as ______. ANS -net operating income ÷ average operating assets
margin × turnover
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