Reference: 12-01 The following information is available on Company A: \[\begin{array} { | l | l | } \hline \text { Sales } & \$ 900,000 \\ \hline \text { Net operating income } & 36,000 \\ \hline \text { Stockholders' equity } & 100,000 \\ \hline \text { Average operating assets } & 180,000 \\ \hline \text { Minimum required rate of return } & 15 \% \\ \hline \end{array}\] -Cable Company had the following results for the year just ended: \[\begin{array} { | l | l | } \hline \text { Net operating income } & \$ 2,500 \\ \hline \text { Turnover } & 4 \\ \hline \text { Return on investment } & 20 \% \\ \hline \end{array}\] Cable Company's average operating assets during the year were?

A) $10,000. B) $50,000. C) $12,500. D) $200,000. A) $10,000. B) $50,000. C) $12,500. D) $200,000.

Reference: 12-07 The following selected data pertain to the belt division of Allen Corp. for last year: \[\begin{array} { | l | l | } \hline \text { Sales } & \$ 500,000 \\ \hline \text { Average operating assets } & \$ 200,000 \\ \hline \text { Net operating income } & \$ 80,000 \\ \hline \text { Turnover } & 2.5 \\ \hline \text { Minimum required return } & 20 \% \\ \hline \end{array}\] -How much is the residual income?

A) $80,000. B) $100,000. C) $40,000. D) $420,000. A) $80,000. B) $100,000. C) $40,000. D) $420,000.

\[\text { Reference: } 12 - 10\] Harstin Corporation has provided the following data: \[\begin{array} { | l | c | } \hline \text { Sales } & \$ 625,000 \\ \hline \text { Gross margin } & 70,000 \\ \hline \text { Net operating income } & 50,000 \\ \hline \text { Stockholders' equity } & 90,000 \\ \hline \text { Average operating assets } & 250,000 \\ \hline \text { Residual income } & 20,000 \\ \hline \end{array}\] -Assuming that sales and net operating income remain the same, a company's return on investment will:

A) decrease if turnover decreases. B) decrease if turnover increases. C) increase if average operating assets increase. D) decrease if average operating assets decrease. A) decrease if turnover decreases. B) decrease if turnover increases. C) increase if average operating assets increase. D) decrease if average operating assets decrease.

Reference: 12-02 The following data are available for the South Division of Redride Products, Inc. and the single product it makes: \[\begin{array} { | l | l | } \hline \text { Unit selling price } & \$ 20 \\ \hline \text { Variable cost per unit } & \$ 12 \\ \hline \text { Annual fixed costs } & \$ 280,000 \\ \hline \text { Average operating assets } & \$ 1,500,000 \\ \hline \end{array}\] -The balance scorecard approach usually includes all of the following categories of measures except:

A) financial measures. B) direct material measures. C) internal business process measures. D) learning and growth measures. A) financial measures. B) direct material measures. C) internal business process measures. D) learning and growth measures.

\[\text { Reference: 12-11 }\] The Millard Division's operating data for the past two years are provided below: \[\begin{array} { | l | l | l | } \hline & \text { Year 1 } & \text { Year 2 } \\ \hline \text { Return on investment } & 12 \% & 36 \% \\ \hline \text { Stockholders' equity } & \$ 800,000 & \$ 500,000 \\ \hline \text { Net operating income } & ? & \$ 360,000 \\ \hline \text { Turnover } & ? & 3 \\ \hline \text { Margin } & ? & ? \\ \hline \text { Sales } & 3,200,000 & ? \\ \hline \end{array}\] Millard Division's margin in Year 2 was 150% of the margin in Year 1. -The average operating assets for Year 2 were?

A) $1,000,000. B) $1,200,000. C) $1,080,000. D) $1,388,889. A) $1,000,000. B) $1,200,000. C) $1,080,000. D) $1,388,889.

Reference: 12-04 Estes Company has assembled the following data for its divisions for the past year: \[\begin{array} { | l | l | l | } \hline & \text { Division A } & \text { Division B } \\ \hline \text { Average operating assets } & \$ 500,000 & ? \\ \hline \text { Sales } & ? & \$ 520,000 \\ \hline \text { Net operating income } & \$ 100,000 & \$ 20,300 \\ \hline \text { Turnover } & 1.25 & 4 \\ \hline \text { Margin } & ? & 3.9 \% \\ \hline \text { Minimum required rate of return } & 14 \% & ? \\ \hline \text { Residual income } & ? & \$ 6,000 \\ \hline \end{array}\] -Division A's residual income is?

A) $35,000. B) $45,000. C) $20,000. D) $30,000. A) $35,000. B) $45,000. C) $20,000. D) $30,000.

Reference: 12-05 The Holmes Division recorded operating data as follows for the past year: \[\begin{array} { | l | r | } \hline \text { Sales } & \$ 200,000 \\ \hline \text { Net operating income } & 25,000 \\ \hline \text { Average operating assets } & 100,000 \\ \hline \text { Stockholders' equity } & 80,000 \\ \hline \text { Residual income } & 13,000 \\ \hline \end{array}\] -Last year, a company had stockholder's equity of $160,000, net operating income of $16,000 and sales of $100,000. Was?

A) 9%. B) 7%. C) 10%. D) 8%. A) 9%. B) 7%. C) 10%. D) 8%.

Reference: 12-10 Harstin Corporation has provided the following data: \[\begin{array} { | l | r | } \hline \text { Sales } & \$ 625,000 \\ \hline \text { Gross margin } & 70,000 \\ \hline \text { Net operating income } & 50,000 \\ \hline \text { Stockholders' equity } & 90,000 \\ \hline \text { Average operating assets } & 250,000 \\ \hline \text { Residual income } & 20,000 \\ \hline \end{array}\] -During Cummings most profitable year its net income was $25,000. What is the ROI if the investment was $50,000?

A) 63%. B) 51%. C) 50%. D) 28%. A) 63%. B) 51%. C) 50%. D) 28%.

Reference: 12-04 Estes Company has assembled the following data for its divisions for the past year: \[\begin{array} { | l | l | l | } \hline & \text { Division A } & \text { Division B } \\ \hline \text { Average operating assets } & \$ 500,000 & ? \\ \hline \text { Sales } & ? & \$ 520,000 \\ \hline \text { Net operating income } & \$ 100,000 & \$ 20,300 \\ \hline \text { Turnover } & 1.25 & 4 \\ \hline \text { Margin } & ? & 3.9 \% \\ \hline \text { Minimum required rate of return } & 14 \% & ? \\ \hline \text { Residual income } & ? & \$ 6,000 \\ \hline \end{array}\] -Division A's sales are?

A) $625,000. B) $200,000. C) $125,000. D) $400,000. A) $625,000. B) $200,000. C) $125,000. D) $400,000.

Reference: 12-02 The following data are available for the South Division of Redride Products, Inc. and the single product it makes: \[\begin{array} { | l | l | } \hline \text { Unit selling price } & \$ 20 \\ \hline \text { Variable cost per unit } & \$ 12 \\ \hline \text { Annual fixed costs } & \$ 280,000 \\ \hline \text { Average operating assets } & \$ 1,500,000 \\ \hline \end{array}\] -How much is the return on the investment?

A) 40%. B) 25%. C) 12.5%. D) 20%. A) 40%. B) 25%. C) 12.5%. D) 20%.

\[\text { Reference: 12-11 }\] The Millard Division's operating data for the past two years are provided below: \[\begin{array} { | l | l | l | } \hline & \text { Year 1 } & \text { Year 2 } \\ \hline \text { Return on investment } & 12 \% & 36 \% \\ \hline \text { Stockholders' equity } & \$ 800,000 & \$ 500,000 \\ \hline \text { Net operating income } & ? & \$ 360,000 \\ \hline \text { Turnover } & ? & 3 \\ \hline \text { Margin } & ? & ? \\ \hline \text { Sales } & 3,200,000 & ? \\ \hline \end{array}\] Millard Division's margin in Year 2 was 150% of the margin in Year 1. -Division B had a ROI last year of 15%. The division's minimum required rate of return is 10%. If the division's average operating assets last year were $450,000, then the division's residual income for last year was?

A) $37,500. B) $22,500. C) $45,000. D) $67,500. A) $37,500. B) $22,500. C) $45,000. D) $67,500.

\[\text { Reference: } 12 - 10\] Harstin Corporation has provided the following data: \[\begin{array} { | l | r | } \hline \text { Sales } & \$ 625,000 \\ \hline \text { Gross margin } & 70,000 \\ \hline \text { Net operating income } & 50,000 \\ \hline \text { Stockholders' equity } & 90,000 \\ \hline \text { Average operating assets } & 250,000 \\ \hline \text { Residual income } & 20,000 \\ \hline \end{array}\] -The return on investment for the past year was?

A) 28%. B) 20%. C) 8%. D) 36%. A) 28%. B) 20%. C) 8%. D) 36%.

Reference: 12-11 The Millard Division's operating data for the past two years are provided below: \[\begin{array} { | l | l | l | } \hline & \text { Year 1 } & \text { Year 2 } \\ \hline \text { Return on investment } & 12 \% & 36 \% \\ \hline \text { Stockholders' equity } & \$ 800,000 & \$ 500,000 \\ \hline \text { Net operating income } & ? & \$ 360,000 \\ \hline \text { Turnover } & ? & 3 \\ \hline \text { Margin } & ? & ? \\ \hline \text { Sales } & 3,200,000 & ? \\ \hline \end{array}\] Millard Division's margin in Year 2 was 150% of the margin in Year 1. -The turnover for Year 1 was?

A) 4.0. B) 1.2. C) 1.5. D) 3.0. A) 4.0. B) 1.2. C) 1.5. D) 3.0.

Reference: 12-01 The following information is available on Company A: \[\begin{array} { | l | l | } \hline \text { Sales } & \$ 900,000 \\ \hline \text { Net operating income } & 36,000 \\ \hline \text { Stockholders' equity } & 100,000 \\ \hline \text { Average operating assets } & 180,000 \\ \hline \text { Minimum required rate of return } & 15 \% \\ \hline \end{array}\] -Company A's residual income is?

A) $45,000. B) $9,000. C) $21,000. D) $24,000. A) $45,000. B) $9,000. C) $21,000. D) $24,000.

Reference: 12-02 The following data are available for the South Division of Redride Products, Inc. and the single product it makes: \[\begin{array} { | l | l | } \hline \text { Unit selling price } & \$ 20 \\ \hline \text { Variable cost per unit } & \$ 12 \\ \hline \text { Annual fixed costs } & \$ 280,000 \\ \hline \text { Average operating assets } & \$ 1,500,000 \\ \hline \end{array}\] -If the South Division wants a residual income of $50,000 and the minimum required rate of return is 10%, the annual turnover will have to be?

A) 0.80. B) 0.32. C) 1.25. D) 1.50. A) 0.80. B) 0.32. C) 1.25. D) 1.50.

Exam 12: Organizational Structure and Performance Measurement

Suppose the manager of the Axle Division desires a return on investment of 22%. In order to achieve this goal, the Axle Division must sell how many units per year?

(Multiple Choice)

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Question 41

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\% -Cable Company had the following results for the year just ended: Net operating income \ 2,500 Turnover 4 Return on investment 20\% Cable Company's average operating assets during the year were?

(Multiple Choice)

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Question 42

Reference: 12-07 The following selected data pertain to the belt division of Allen Corp. for last year: Sales \ 500,000 Average operating assets \ 200,000 Net operating income \ 80,000 Turnover 2.5 Minimum required return 20\% -How much is the residual income?

(Multiple Choice)

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(35)

Question 43

$\text { Reference: } 12 - 10$ 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 -Assuming that sales and net operating income remain the same, a company's return on investment will:

(Multiple Choice)

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Question 44

$\text { Reference: } 12 - 10$ 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 -The return on investment can ordinarily be improved by either increasing sales, reducing expenses, or reducing operating assets, assuming each of the other factors remain unchanged.

(True/False)

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Question 45

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 -The balance scorecard approach usually includes all of the following categories of measures except:

(Multiple Choice)

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(31)

Question 46

$\text { Reference: 12-11 }$ The Millard Division's operating data for the past two years are provided below: Year 1 Year 2 Return on investment 12\% 36\% Stockholders' equity \ 800,000 \ 500,000 Net operating income ? \ 360,000 Turnover ? 3 Margin ? ? Sales 3,200,000 ? Millard Division's margin in Year 2 was 150% of the margin in Year 1. -The average operating assets for Year 2 were?

(Multiple Choice)

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Question 47

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 -Division A's residual income is?

(Multiple Choice)

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(34)

Question 48

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 -Last year, a company had stockholder's equity of $160,000, net operating income of $16,000 and sales of $100,000. Was?

(Multiple Choice)

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Question 49

$\text { Reference: } 12 - 10$ 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 -Support departments within an organization such as information technology, cannot be evaluated as profit centres as they have no external sales revenues.

(True/False)

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Question 50

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 -During Cummings most profitable year its net income was $25,000. What is the ROI if the investment was $50,000?

(Multiple Choice)

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(42)

Question 51

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 -Division A's sales are?

(Multiple Choice)

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Question 52

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 much is the return on the investment?

(Multiple Choice)

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Question 53

$\text { Reference: 12-11 }$ The Millard Division's operating data for the past two years are provided below: Year 1 Year 2 Return on investment 12\% 36\% Stockholders' equity \ 800,000 \ 500,000 Net operating income ? \ 360,000 Turnover ? 3 Margin ? ? Sales 3,200,000 ? Millard Division's margin in Year 2 was 150% of the margin in Year 1. -Division B had a ROI last year of 15%. The division's minimum required rate of return is 10%. If the division's average operating assets last year were $450,000, then the division's residual income for last year was?

(Multiple Choice)

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Question 54

$\text { Reference: } 12 - 10$ 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 -The return on investment for the past year was?

(Multiple Choice)

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Question 55

Reference: 12-11 The Millard Division's operating data for the past two years are provided below: Year 1 Year 2 Return on investment 12\% 36\% Stockholders' equity \ 800,000 \ 500,000 Net operating income ? \ 360,000 Turnover ? 3 Margin ? ? Sales 3,200,000 ? Millard Division's margin in Year 2 was 150% of the margin in Year 1. -The turnover for Year 1 was?

(Multiple Choice)

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Question 56

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 residual income is?

(Multiple Choice)

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Question 57

$\text { Reference: } 12 - 10$ 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 -An investment centre has the highest level of responsibility from a performance management perspective.

(True/False)

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Question 58

$\text { Reference: } 12 - 10$ 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 -Centralized organizations normally include multiple business segments.

(True/False)

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(38)

Question 59

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 -If the South Division wants a residual income of $50,000 and the minimum required rate of return is 10%, the annual turnover will have to be?

(Multiple Choice)

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Question 60

Suppose the manager of the Axle Division desires a return on investment of 22%. In order to achieve this goal, the Axle Division must sell how many units per year?

Reference: 12-07 The following selected data pertain to the belt division of Allen Corp. for last year: Sales \ 500,000 Average operating assets \ 200,000 Net operating income \ 80,000 Turnover 2.5 Minimum required return 20\% -How much is the residual income?

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 much is the return on the investment?

$\text { Reference: } 12 - 10$ 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 -The return on investment for the past year was?

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 residual income is?

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