Exam 14: Business Unit Performance Measurement

Which of the following statement(s)is/are false? (A)Residual income can be used to compare divisions of different sizes. (B)Residual income can be used to compare divisions that are profit centers.

How will increases in the following items affect return on investment (ROI)?

The following information pertains to Bala Co.for the year ended December 31: (CPA adapted) Which of the following equations should be used to compute Bala's return on investment (ROI)?

Use the following information to compute residual income:

The following information was presented by Delta Manufacturing Company for an asset purchased at the end of the previous year. What is the return on investment (ROI)assuming Delta (a)uses the straight-line method for depreciation and (b)beginning-of-year net book values to compute ROI?

A division earning a profit will increase its return on investment (ROI)if it increases operating expenses and

Most organizations use residual income instead of return on investment (ROI)as a performance measure.

Managerial performance can be measured in many different ways including return on investment (ROI)and residual income.A good reason for using residual income instead of ROI is that

What was C Division's cost of capital last year?

Return on investment (ROI)can be decomposed into the asset turnover and the

Level return on investments (ROI)over the life of a long-term project is more likely when ROI is computed using

Which of the following statements regarding the use of historical costs and current costs to compute return on investment (ROI)is (are)true? (A)Historical costs are based on the original costs to acquire a long-term asset,while current costs represent the costs to replace the long-term asset. (B)For a specific multiple-period project,the return on investment (ROI)computed using current costs will generally be less than the ROI computed using historical costs.

A problem with ratio-based measures is that managers can make decisions that improve divisional income but lower total organizational income.

Explain how using gross book value to measure the assets gives different results than using net book value.What happens to ROI over time under each of the two measures?

The following information is available for Company X: What is Company X's return on investment (ROI)?

What was A Division's residual income last year?

If a division is evaluated using return on investment (ROI)without regard to how assets are financed,the denominator in the ROI calculation will be

The following information is available for Company X: What is Company X's residual income?

How will decreases in the following items affect residual income?

Rayburn Corporation purchased a new machine for $120,000.The machine has an estimated useful life of 10-years with no salvage value and a return on investment (ROI)of 15%.ROI is computed using annual cash flows and straight-line depreciation.What is the annual cash flow using the gross book value method?