Exam 15: Performance Evaluation and Compensation

The average investment to be used in the EVA computation for 2005 was

The after-tax income for 2005 was

"Reduce costs by 5%" is an example of a(n)

For 2006, Aberdeen's return on investment was 26% and its investment turnover was 2.0. Return on sales for 2006 was

An advantage of using negotiated transfer prices is

Use the following information for the next 2 questions. The Kelso Division produces and sells a product to external and internal customers. Per-unit information about its operations include: -If Kelso has sufficient excess capacity to meet internal demand, what should be the transfer price for Kelso's product?

Specific knowledge is

Agency theory recognizes two kinds of information consumers. Which of the following describes the relationship between them?

In responsibility accounting, information is used to I. Measure performance II. Produce financial statements for external users III. Motivate managers to perform well

To reduce agency costs, organizations implement various systems and controls to monitor behavior, including I. Publishing audited financial statements II. Filing income tax returns III. Tying financial rewards to reported results

Use the following information for the next 4 questions. Teresa's Taco Co. had the following results during the most recent year: Sales $500,000; Residual income $5,000; investment turnover 2.5; and a required rate of return of 15%. -A business segment that has responsibility for both revenues and expenses is called a(n)

Governments often require the following type of transfer price for income taxes

Use the following information for the next 3 questions. Division X sells organic high-gluten flour to Division Y. Division X incurs costs of $0.375 per pound of flour. Division Y makes loaves of bread that sell for $2.50 each. Division Y incurs costs of $1.25 per loaf, excluding the cost of the flour. Each loaf of bread uses one-half pound of flour. -What is the operating income for the entire organization if 100,000 loaves of bread are sold?

In a profit center, managers' primary goal is to maximize revenues.

Compensation contracts that provide incentives for agents to increase organizational value might include I. Cash-based bonuses II. Stock options III. Cash bonuses based on stock price increases or targets

An advantage of centralization is

A transfer price is required only when goods or services are transferred between cost centers in the same organization.

Use the following information for the next 4 questions. Teresa's Taco Co. had the following results during the most recent year: Sales $500,000; Residual income $5,000; investment turnover 2.5; and a required rate of return of 15%. -For 2005, Aberdeen's return on sales was 10% and its investment turnover was 2.0. Return on investment for 2005 was

Use the following information for the next 2 questions. The National Division of Roboto Company is buying 10,000 widgets from an outside supplier at $30 per unit. Roboto's Overseas Division, which is producing and selling at full capacity (12,000 units), has the following sales and cost structure: -If the Overseas Division meets the outside supplier's price and sells the 10,000 widgets to National, the effect on overall company profits will be

Hitek, Inc has 2 divisions, Diodes and Boards. The diode can be sold internally or externally. If sold externally, the sales price is $15 per diode. The Boards division needs 3 diodes for each electronic board it produces. The external sales prices and costs are: If Diodes can sell all of its production externally, what is the minimum price at which it would be willing to sell internally, and what is the maximum price the Board Division would be willing to pay?