Exam 11: Performance Measurement in Decentralized Organizations

Some investment opportunities that should be accepted from the viewpoint of the entire company may be rejected by a manager who is evaluated on the basis of:

Which of the following measures of performance encourages continued expansion by an investment center so long as it is able to earn a return in excess of the minimum required return on average operating assets?

Rotan Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below: -The throughput time was:

Which of the following performance measures will increase if inventory decreases and all else remains the same?

The Millard Division's operating data for the past two years are provided below: Millard Division's margin in Year 2 was 150% of the margin in Year 1. -The net operating income for Year 1 was:

Tanouye Corporation keeps careful track of the time required to fill orders.Data concerning a particular order appear below: The throughput time was:

Familia Inc.reported the following results from last year's operations: At the beginning of this year,the company has a $1,200,000 investment opportunity with the following characteristics: The company's minimum required rate of return is 13%. Required: 1.What was last year's return on investment (ROI)? (Round to the nearest 0.1%.) 2.What is the ROI related to this year's investment opportunity? (Round to the nearest 0.1%.) 3.If the company pursues the investment opportunity and otherwise performs the same as last year,what will be the overall ROI will this year? (Round to the nearest 0.1%.) 4.If Westerville's chief executive officer earns a bonus only if the ROI for this year exceeds the ROI for last year,would the CEO pursue the investment opportunity? Would the owners of the company want the CEO to pursue the investment opportunity?

Rotan Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below: -The delivery cycle time was:

Return on investment (ROI)equals margin multiplied by sales.

Gauntlett Inc. reported the following results from last year's operations: At the beginning of this year, the company has a $1,300,000 investment opportunity with the following characteristics: -If the company pursues the investment opportunity and otherwise performs the same as last year,the combined turnover for the entire company will be closest to:

Beery Inc.reported the following results from last year's operations: At the beginning of this year,the company has a $900,000 investment opportunity with the following characteristics: The company's minimum required rate of return is 12%.If the company pursues the investment opportunity,this year's combined residual income for the entire company will be closest to:

All other things equal,which of the following would increase a division's residual income?

Throughput time is the amount of time required to move a completed unit from the factory floor to the warehouse.

The Consumer Products Division of Goich Corporation had average operating assets of $800,000 and net operating income of $81,300 in May. The minimum required rate of return for performance evaluation purposes is 10%. -What was the Consumer Products Division's residual income in May?

The following data are for the Akron Division of Consolidated Rubber, Inc.: -For the past year,the minimum required rate of return was:

Leete Inc.reported the following results from last year's operations: Last year's margin was closest to:

Ibale Industries is a division of a major corporation.The following data are for the latest year of operations: Required: What is the division's residual income?

A manager would generally like to see a trend indicating a decrease in setup time.

Tallon Inc.has a $1,200,000 investment opportunity that involves sales of $1,680,000,fixed expenses of $336,000,and a contribution margin ratio of 30% of sales.The turnover for this investment opportunity is closest to:

Babak Industries is a division of a major corporation. Last year the division had total sales of $19,560,000, net operating income of $1,877,760, and average operating assets of $6,000,000. -The division's return on investment (ROI)is closest to: