Exam 10: Performance Evaluation

Pendant Publishing reported the following results for its Textbook Division: Pendant's target rate of return is 15% and the weighted average cost of capital is 10%. Its effective tax rate is 35%. What is the Textbook Division's capital turnover?

Selected financial data for The Portland Porcelain Works Coffee Mug Division is as follows: What is The Portland Porcelain Works Coffee Mug Division sales margin?

With regard to a static budget instead of a flexible budget, which of the following is true?

The production line at Morningstar Farms is most likely treated as a(n)

Assume the Air Conditioning division of the General Appliance Corporation had the following results last year (in thousands). Management's target rate of return is 15% and the weighted average cost of capital is 10%. Its effective tax rate is 35%. What is the division's Return on Investment (ROI)?

Total assets is used in the denominator when calculating ROI.

A potential advantage of decentralization is which of the following?

Which term below best fits "a part, segment, or subunit of a company whose manager is accountable for specified activities"?

The Engine Division of The Cleveland Automotive Corporation had sales of $7,200,000 and operating income of $864,000 last year. The total assets of the Engine Division were $3,200,000 while current liabilities were $800,000. The Cleveland Automotive Corporation's target rate of return is 13% while its weighted average cost of capital is 9%. The effective tax rate for the company is 45%. Required: a. Calculate the sales margin. b. Calculate the capital turnover. c. Calculate the return on investment (ROI). d. Calculate the residual income.

Assume the Air Conditioning division of the General Appliance Corporation had the following results last year (in thousands). Management's target rate of return is 15% and the weighted average cost of capital is 10%. Its effective tax rate is 35%. What is the division's Residual Income (RI)?

The regional sales department for Xerox copiers is most likely treated as a(n)

Responsibility accounting performance reports compare budgets with actual results for each responsibility center.

A flexible budget is a budget prepared for a different level of volume than that which was originally anticipated.

The number of employee suggestions implemented and percentage of the sales force with access to real-time inventory levels would be examples of the

Which type of variance causes operating income to be lower than budgeted?

The Southern Division of Amelia Corporation had sales of $6,500,000 and operating income of $1,200,000 last year. The total assets of the Southern Division were $3,000,000, while current liabilities were $450,000. Amelia Corporation's target rate of return is 10%, while its weighted average cost of capital is 6%. The effective tax rate for the company is 30%. What is the Southern Division's Return on Investment (ROI)?

The following data relates to Haven Corporation and its Northern Division. What is the Northern Division's Residual Income (RI)?

The Top Hat Division of Blandon's Fine Menswear had the following results last year (in thousands). Management's target rate of return is 12% and the weighted average cost of capital is 9%. What is the Top Hat Division's sales margin?

The duties of an investment center manager are similar to those of a CFO.

If a company must decrease its selling price while all of the company's expenses remain constant, what will happen to return on investment (ROI)?