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Chapter 18 - Organizational Design, Responsibility Accounting, and Evaluation of Divisional Performance Chapter 18 Organizational Design, Responsibility Accounting, and Evaluation of Divisional Performance True / False Questions 1. Responsibility accounting refers to the various concepts and tools used to measure the performance of people and departments in order to foster goal or behavioral congruence. TRUE AACSB: Analytic; Reflective Thinking AICPA BB: Critical Thinking; Resource Management AICPA FN: Measurement; Reporting Difficulty: Medium Learning Objective: 1 2. Goal congruence results when the managers of subunits throughout an organization have incentives to perform in the common interest. TRUE AACSB: Analytic; Reflective Thinking AICPA BB: Critical Thinking; Resource Management Difficulty: Medium Learning Objective: 1 3. The fundamental purpose of a responsibility accounting system is to help an organization reap the benefits of decentralization while minimizing the costs. TRUE AACSB: Analytic; Reflective Thinking AICPA BB: Critical Thinking; Resource Management AICPA FN: Measurement; Reporting Difficulty: Medium Learning Objective: 2 18-1 Chapter 18 - Organizational Design, Responsibility Accounting, and Evaluation of Divisional Performance 4. The manager of an investment center is held accountable for the subunit's profits and the invested capital used by the subunit to generate its profit. TRUE AACSB: Analytic; Reflective Thinking AICPA BB: Critical Thinking; Resource Management AICPA FN: Measurement; Reporting Difficulty: Medium Learning Objective: 3 5. A responsibility center is a subunit in an organization whose manager is held accountable for specified financial and non-financial results of the subunit's activities. TRUE AACSB: Analytic AICPA BB: Critical Thinking; Resource Management AICPA FN: Measurement Difficulty: Medium Learning Objective: 3 6. A cost center is an organizational subunit whose manager is held accountable for costs, but the subunit's input-output relationship is not well specified. FALSE AACSB: Analytic AICPA BB: Critical Thinking; Resource Management AICPA FN: Measurement Difficulty: Medium Learning Objective: 3 7. The check processing department in a bank might be called a cost center. TRUE AACSB: Analytic AICPA BB: Critical Thinking; Resource Management AICPA FN: Measurement Difficulty: Medium Learning Objective: 3 18-2 Chapter 18 - Organizational Design, Responsibility Accounting, and Evaluation of Divisional Performance 8. An airline's reservation department is an example of a profit center. FALSE AACSB: Analytic AICPA BB: Critical Thinking; Resource Management AICPA FN: Measurement Difficulty: Easy Learning Objective: 3 9. A company-owned hotel in a hotel chain is an investment center. ... View Full Document

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