Exam 12: Decentralization and Performance Evaluation

arrow
  • Select Tags
search iconSearch Question
flashcardsStudy Flashcards
  • Select Tags

Standard Media has a required rate of return of 5 percent, a cost of capital of 4 percent, and an income tax rate of 30 percent. The following information about its two divisions has been provided by management: Audio Division Video Division NOPAT \ 1,400,000 \ 2,000,000 Sales \ 10,000,000 \ 12,500,000 Invested capital \ 15,000,000 \ 17,500,000 An opportunity is available that yields an expected income of $45,900 on an investment of $450,000. If the divisions are evaluated based on return on investment, which division(s) will accept the opportunity?

(Multiple Choice)
4.8/5
(36)

If a manager is evaluated using the return on investment, the manager may be reluctant to invest in new equipment because the additional investment

(Multiple Choice)
4.8/5
(35)

The following information is reported for the current year for North Atlantic Division of XT Enterprises: Sales \ 3,800,000 Interest expense \ 250,000 Net income \ 500,000 Total assets \ 5,000,000 Noninterest-bearing current liabilities \ 400,000 Cost of capital 8\% Required rate of return 14\% Tax rate 30\% How much is the division's NOPAT?

(Multiple Choice)
4.8/5
(30)

Pegasus Recycling has a subsidiary that recycles yard waste and another that recycles paper. Information related to the two subsidiaries follows. Yard Recycling Paper Recycling Total assets \ 8,000,000 \ 15,000,000 Noninterest-bearing current liabilities 500,000 1,000,000 Net income 1,500,000 2,600,000 Interest expense 600,000 800,000 Required rate of return 8\% 11\% Cost of capitall 7\% 9\% Tax rate 30\% 32\% Which subsidiary has added the most to shareholder value in the last year?

(Multiple Choice)
4.8/5
(31)

For what does responsibility accounting hold managers responsible?

(Multiple Choice)
4.7/5
(42)

An adjustment is made to net income when calculating residual income to remove

(Multiple Choice)
4.9/5
(34)

Which of the following is a disadvantage of a decentralized organization?

(Multiple Choice)
4.7/5
(36)

The income statement for the Commercial Construction Division of the Kenyon Company is as follows: Sales \ 272,000 Operating expenses Net operating income 140,000 Interest expense 20,000 Earnings before taxes 120,000 Income tax expense (30\%) 36,000 Net income \ 84,000 If this division's invested capital is $500,000, how much is its return on investment?

(Multiple Choice)
4.9/5
(32)

The Pastry Division of Dream Bread has invested capital of $1,300,000. During the past year, the Pastry Division reported sales of $5,590,000 and earned $400,000 of NOPAT. By how many times did revenue exceed the Pastry Division's investment?

(Multiple Choice)
4.7/5
(37)

Pegasus Recycling has a subsidiary that recycles yard waste and another that recycles paper. Information related to the two subsidiaries follows. Yard Recycling Paper Recycling Total assets \ 8,000,000 \ 15,000,000 Noninterest-bearing current liabilities 500,000 1,000,000 Net income 1,500,000 2,600,000 Interest expense 600,000 800,000 Required rate of return 8\% 11\% Cost of capitall 7\% 9\% Tax rate 30\% 32\% How much is the return on investment for the Paper Recycling Division?

(Multiple Choice)
4.9/5
(35)

Last year, Processor Division of Mathews PC Company earned NOPAT of $200,000 on sales of $2,600,000. The division had invested capital of $1,600,000 with $62,000 of noninterest-bearing current liabilities. How much is the division's return on investment?

(Multiple Choice)
4.8/5
(35)

If responsibility centers are ranked in order of increasing responsibility, the ranking is

(Multiple Choice)
4.9/5
(39)

Economic value added is residual income adjusted for

(Multiple Choice)
4.8/5
(37)

A cost center

(Multiple Choice)
4.8/5
(32)

Bottling Division of Fizzies Drink Company bottles soft drink produced by other divisions of Fizzies Drink Company. The Bottling Division had sales last year of $1,200,000, and earned $300,000 in income (NOPAT). Its invested capital was $1,000,000. How much are the Bottling Division's profit margin, investment turnover, and return on investment?

(Multiple Choice)
4.9/5
(42)

Western Electric reported the following results for 2014: Sales \ 8,400,000 Investment turnover 2.5 Return on investment 12\% Given this information, how much is the company's NOPAT?

(Multiple Choice)
4.8/5
(41)

The manager of the West Division of Beach Clothing Company is evaluating the acquisition of a new embroidery machine. The budgeted operating income of the West Division was $4,000,000 with total assets of $22,000,000 and noninterest-bearing current liabilities of $1,000,000. The proposed investment would add $750,000 to operating income and would require an additional investment of $3,500,000. The targeted rate of return for the West Division is 14 percent and the cost of capital is 9 percent. Ignoring taxes, how much is the residual income of the West division if the embroidery machine is purchased?

(Multiple Choice)
4.9/5
(37)

Hardin Division of WestCo has sales of $300,000 and NOPAT of $15,000. The company's invested capital is $240,000 and its non-interest-bearing current liabilities are $20,000. What is Hardin Division's profit margin as it relates to investment center performance evaluation?

(Multiple Choice)
4.8/5
(36)

Division 3 of Baritune Enterprises reported sales of $820,000, NOPAT totaling $61,500, interest expense of $8,000, and invested capital totaling $512,500. Its income tax rate is 30 percent. As it pertains to evaluating investment centers, how much is Division 3's profit margin?

(Multiple Choice)
4.9/5
(34)

The evaluation of a subunit should be separated from the evaluation of the subunit's manager because

(Multiple Choice)
4.8/5
(39)
Showing 61 - 80 of 161
close modal

Filters

  • Essay(0)
  • Multiple Choice(0)
  • Short Answer(0)
  • True False(0)
  • Matching(0)