1. Describe at least four advantages of decentralization. Also describe at least two disadvantages to decentralization.
2. Compare and contrast a cost center, a revenue center, a profit center, and an investment center. List a specific example of each type of responsibility center. How is the performance of managers evaluated in each type of responsibility center?
3. Explain the potential problem which could arise from using ROI as the incentive measure for managers. What are some specific actions a company might take to resolve this ­potential problem?
4. Describe at least two specific actions that a company could take to improve its ROI.
5. Define residual income. How is it calculated? Describe the major weakness of residual income.
6. Compare and contrast a master budget and a flexible budget.
7. Define key performance indicator (KPI). What is the relationship between KPIs and a company’s objectives? Select a company of any size with which you are familiar. List at least four examples of specific objectives that a company might have and one potential KPI for each of those specific objectives.
8. List and describe the four perspectives found on a balanced scorecard. For each perspective, list at least two examples of KPIs which might be used to measure performance on that perspective.
9. Contrast lag indicators with lead indicators. Provide an example of each type of indicator.