The following data pertains to the Retail Division of Motor Express: $\begin{array}{lr} \text { Sales } & \$ 700,000 \\ \text { Invested capital } & 200,000 \\ \text { Net operating profit after taxes } & 49,000 \\ \text { Noninterest-bearing current liabilities } 20,000 \end{array}$ The minimum rate of return specified by Motor Express is 12 percent and the cost of capital is 8 percent.How much is residual income?

A) $33,000 B) $25,000 C) $27,400 D) $34,600 A) $33,000 B) $25,000 C) $27,400 D) $34,600

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

A) $575,000 B) $500,000 C) $750,000 D) $675,000 A) $575,000 B) $500,000 C) $750,000 D) $675,000

The Florida Division of Garner Furniture reported the following results for 2017: \[\begin{array} { l r } \text { Invested capital } & \$ 800,000 \\ \text { Profit margin } & 5 \% \\ \text { Return on investment } & 8 \% \end{array}\] Given this information, how much was sales?

A) $1,280,000 B) $500,000 C) $1,600,000 D) $64,000 A) $1,280,000 B) $500,000 C) $1,600,000 D) $64,000

Consider the following information for the Executive Division of Buy Electronics: $\begin{array}{lrr}&\text { December } 31\\&2017&2018\\ \text { Total assets } & \$ 11,800,000 & \$ 11,000,000 \\ \text { Noninterest-bearing current liabilities } & 500,000 & 520,000 \\ \text { Net income } & 700,000 & 800,000 \\ \text { Interest expense } & 210,000 & 300,000 \\ \text { Income tax rate } & 35 \% & 35 \% \\ \text { Cost of capital } & 7 \% & 8 \% \\ \text { Required rate of return } & 9 \% & 11 \% \end{array}$ How much is residual income for 2018?

A) $45,500 B) ($180,500) C) $119,000 D) ($227,500) A) $45,500 B) ($180,500) C) $119,000 D) ($227,500)

Exam 12: Decentralization and Performance Evaluation

The following data pertains to the Retail Division of Motor Express: Sales \ 700,000 Invested capital 200,000 Net operating profit after taxes 49,000 Noninterest-bearing current liabilities 20,000 The minimum rate of return specified by Motor Express is 12 percent and the cost of capital is 8 percent.How much is residual income?

(Multiple Choice)

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Question 121

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)

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Question 122

One disadvantage of evaluating performance using return on investment is that assets are measured at their market value.

(True/False)

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Question 123

Return on investment is used to evaluate

(Multiple Choice)

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Question 124

Doral Division of Resorts International reported net operating profit after taxes totaling $120,000 in 2017.The cost of capital is 10.5 percent and the invested capital is $560,000.R&D incurred in 2017 was $100,000.The company's policy is to amortize intangible assets over 4 years.The income tax rate is 30 percent.How much is the company's economic value added for 2017?

(Multiple Choice)

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Question 125

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

(Multiple Choice)

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Question 126

Align Division is one of the divisions of DynaCore.Align's invested capital is $420,000.Last year, Align generated NOPAT of $64,260 on sales of $756,000.Which one of the following correctly calculates Align Division's return on investment using the two components of return on investment?

(Multiple Choice)

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Question 127

South Division of Renato Enterprises reported net income of $480,000 in March on sales of $7,900,000.If this division has no interest expense, an income tax rate of 30 percent, and reported a return on investment of 12 percent, how much is invested capital?

(Multiple Choice)

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Question 128

Which of the following units of Walmart will most likely be a cost center?

(Multiple Choice)

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Question 129

Goal congruence refers to the match between

(Multiple Choice)

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Question 130

The Florida Division of Garner Furniture reported the following results for 2017: Invested capital \ 800,000 Profit margin 5\% Return on investment 8\% Given this information, how much was sales?

(Multiple Choice)

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Question 131

One of the primary tools for evaluating the performance of profit centers is residual income.

(True/False)

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Question 132

Which of the following is an advantage of a decentralized organization?

(Multiple Choice)

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Question 133

In which dimension of a balanced scorecard is the measure of the number of new patents developed through research and development?

(Multiple Choice)

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Question 134

Economic value added is

(Multiple Choice)

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Question 135

Consider the following information for the Executive Division of Buy Electronics: December 31 2017 2018 Total assets \ 11,800,000 \ 11,000,000 Noninterest-bearing current liabilities 500,000 520,000 Net income 700,000 800,000 Interest expense 210,000 300,000 Income tax rate 35\% 35\% Cost of capital 7\% 8\% Required rate of return 9\% 11\% How much is residual income for 2018?

(Multiple Choice)

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Question 136

One disadvantage of evaluating performance using return on investment is that assets are measured at their market value.

Return on investment is used to evaluate

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

Align Division is one of the divisions of DynaCore.Align's invested capital is $420,000.Last year, Align generated NOPAT of $64,260 on sales of $756,000.Which one of the following correctly calculates Align Division's return on investment using the two components of return on investment?

South Division of Renato Enterprises reported net income of $480,000 in March on sales of $7,900,000.If this division has no interest expense, an income tax rate of 30 percent, and reported a return on investment of 12 percent, how much is invested capital?

Which of the following units of Walmart will most likely be a cost center?

Goal congruence refers to the match between

The Florida Division of Garner Furniture reported the following results for 2017: Invested capital \ 800,000 Profit margin 5\% Return on investment 8\% Given this information, how much was sales?

One of the primary tools for evaluating the performance of profit centers is residual income.

Which of the following is an advantage of a decentralized organization?

In which dimension of a balanced scorecard is the measure of the number of new patents developed through research and development?

Economic value added is

Managerial Accounting in the Information Age

Job-Order Costing for Manufacturing and Service Companies

Process Costing

Cost-Volume-Profit Analysis

Variable Costing

Cost Allocation and Activity-Based Costing

The Use of Cost Information in Management Decision Making

Pricing Decisions

Capital Budgeting Decisions

Budgetary Planning and Control

Standard Costs and Variance Analysis

Statement of Cash Flows

Analyzing Financial Statements: a Managerial Perspective

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