Exam 12: Organizational Structure and Performance Measurement

$\text { Reference: } 12 - 10$ Harstin Corporation has provided the following data: Sales \ 625,000 Gross margin 70,000 Net operating income 50,000 Stockholders' equity 90,000 Average operating assets 250,000 Residual income 20,000 -A key feature of the balanced scorecard performance measurement system is that the different dimensions are linked together.

$\text { Reference: 12-09 }$ The Northern Division of Gordon Company reported the following data for last year: Sales \ 900,000 Stockholders' equity \ 320,000 Operating expenses \ 700,000 Average operating assets \ 500,000 Interest expense \ 50,000 Tax expense \ 60,000 Minimum required rate of return 15\% -Sales in Year 1 amounted to?

$\text { Reference: 12-04 }$ Estes Company has assembled the following data for its divisions for the past year: Division A Division B Average operating assets \ 500,000 ? Sales ? \ 520,000 Net operating income \ 100,000 \ 20,300 Turnover 1.25 4 Margin ? 3.9\% Minimum required rate of return 14\% ? Residual income ? \ 6,000 -Turnover is computed by dividing average operating assets into:

$\text { Reference: } 12 - 10$ Harstin Corporation has provided the following data: Sales \ 625,000 Gross margin 70,000 Net operating income 50,000 Stockholders' equity 90,000 Average operating assets 250,000 Residual income 20,000 -Return on investment can provide information as to the benefits that managers can obtain by reducing their investments in current and fixed assets.

$\text { Reference: } 12 - 10$ Harstin Corporation has provided the following data: Sales \ 625,000 Gross margin 70,000 Net operating income 50,000 Stockholders' equity 90,000 Average operating assets 250,000 Residual income 20,000 -In looking at ROI, turnover measures management's ability to control operating expenses in relation to sales.

Reference: 12-01 The following information is available on Company A: Sales \ 900,000 Net operating income 36,000 Stockholders' equity 100,000 Average operating assets 180,000 Minimum required rate of return 15\% -Company A's return on investment (ROI)is?

Reference: 12-03 The Axle Division of LaBate Company makes and sells only one product. Annual data on the Axle Division's single product follow: Unit selling price \ 50 Unit variable cost \ 30 Total fixed costs \ 200,000 Average operating assets \ 750,000 Minimum required rate of return 12\% -If the Axle Division sells 15,000 units per year, the residual income should be

Reference: 12-10 Harstin Corporation has provided the following data: Sales \ 625,000 Gross margin 70,000 Net operating income 50,000 Stockholders' equity 90,000 Average operating assets 250,000 Residual income 20,000 -A segment of a business responsible for both revenues and expenses would be called:

Reference: 13-02 Financial statements for Larned Company appear below: Larned Company Balance Sheet December 31, 20X6 and 20X5 (dollars in thousands) 20X6 20\times5 Current assets: Cash and marketable securities \ 130 \ 100 Accounts receivable, net 150 130 Inventory 100 100 Prepaid expenses 20 20 Total current assets 400 350 Noncurrent assets: Plant \& equipment, net 1,640 1,600 Plant \& equipment, net 1,640 1,600 Total assets \ 2,040 \ 1,950 Current liabilities: Accounts payable \ 120 \ 120 Accrued liabilities 110 80 Notes payable, short term 170 160 Total current liabilities 400 360 Noncurrent liabilities: Bonds payable 370 400 Total liabilities 770 760 Shareholders' equity: Preferred shares, \2 0 par, 10\% 120 120 Common shares, \1 0 par 180 180 Additional paid-in capital--common shares 110 110 Retained earnings 860 780 Total shareholders' equity 1,270 1,190 Total liabilities \& shareholders' equity \ 2,040 \ 1,950 Larned Company Income Statement For the Year Ended December 31, 20X6 (dollars in thousands) Sales (all on account) \ 2,930 Cost of goods sold 2,050 Gross margin 880 Operating expenses 350 Net operating income 530 Interest expense 40 Net income before taxes 490 Income taxes (30\%) 147 Net income \ 343 Dividends during 20X6 totalled $263 thousand, of which $12 thousand were preferred dividends. The market price of a share of common stock on December 31, 20X6 was $160. Included in operating expenses was depreciation expense of $20,000. 7 -Which of the following is not an operating asset

Reference: 12-01 The following information is available on Company A: Sales \ 900,000 Net operating income 36,000 Stockholders' equity 100,000 Average operating assets 180,000 Minimum required rate of return 15\% -A company had the following results last year: 28%; and margin, 8%. The average operating assets last year were?

$\text { Reference: } 12 - 10$ Harstin Corporation has provided the following data: Sales \ 625,000 Gross margin 70,000 Net operating income 50,000 Stockholders' equity 90,000 Average operating assets 250,000 Residual income 20,000 -In performing return on investment calculations, it is safe to assume that total assets from the balance sheet may be used in all calculations.

Net operating income is defined as:

$\text { Reference: 12-09 }$ The Northern Division of Gordon Company reported the following data for last year: Sales \ 900,000 Stockholders' equity \ 320,000 Operating expenses \ 700,000 Average operating assets \ 500,000 Interest expense \ 50,000 Tax expense \ 60,000 Minimum required rate of return 15\% -Howe Company increased its ROI from 20% to 25%.. By how much was inventory reduced?

Reference: 12-05 The Holmes Division recorded operating data as follows for the past year: Sales \ 200,000 Net operating income 25,000 Average operating assets 100,000 Stockholders' equity 80,000 Residual income 13,000 -For the past year, the return on investment was?

$\text { Reference: 12-09 }$ The Northern Division of Gordon Company reported the following data for last year: Sales \ 900,000 Stockholders' equity \ 320,000 Operating expenses \ 700,000 Average operating assets \ 500,000 Interest expense \ 50,000 Tax expense \ 60,000 Minimum required rate of return 15\% -The return on investment last year for the Northern Division was?

$\text { Reference: } 12 - 10$ Harstin Corporation has provided the following data: Sales \ 625,000 Gross margin 70,000 Net operating income 50,000 Stockholders' equity 90,000 Average operating assets 250,000 Residual income 20,000 -Since the sales figure is neutral in the return on investment (ROI)formula ROI = Margin × Turnover, a change in total sales will not affect ROI.

$\text { Reference: } 12 - 10$ Harstin Corporation has provided the following data: Sales \ 625,000 Gross margin 70,000 Net operating income 50,000 Stockholders' equity 90,000 Average operating assets 250,000 Residual income 20,000 -ROI and residual income can be used as performance measures.

Reference: 12-02 The following data are available for the South Division of Redride Products, Inc. and the single product it makes: Unit selling price \ 20 Variable cost per unit \ 12 Annual fixed costs \ 280,000 Average operating assets \ 1,500,000 -How many units must the South Division sell each year to have an ROI of 16%

Reference: 12-12 The Sherlock Division recorded operating data as follows for the past year: Sales \ 300,000 Operating expenses 225,000 Average operating assets 225,000 Stockholders' equity 80,000 Minimum required rate of return 20\% -All other things being equal, a company's return on investment (ROI)would generally increase when:

Reference: 12-06 The Baily Division recorded operating data as follows for the past two years: Year 1 Year 2 Sales ? \ 1,200,000 Stockholders' equity \ 540,000 720,000 Average operating assets \ 600,000 ? Margin 15\% ? Return on investment 22.5\% 18\% Baily Division's turnover was exactly the same in both Year 1 and Year 2. -Assuming that sales and average operating assets remain the same, a company's return on investment will: