Exam 11: Performance Measurement in Decentralized Organizations

Financial measures such as ROI are generally better than nonfinancial measures of key success drivers such as customer satisfaction as leading indicators of future financial performance.

Eady Wares is a division of a major corporation.The following data are for the latest year of operations: Required: a.What is the division's margin? b.What is the division's turnover? c.What is the division's return on investment (ROI)? d.What is the division's residual income?

A manufacturing cycle efficiency (MCE)ratio of less than 1.00 is desirable because this is the ratio of non-value-added time to throughput time.

Cabell Products is a division of a major corporation. Last year the division had total sales of $25,320,000, net operating income of $1,924,320, and average operating assets of $6,000,000. The company's minimum required rate of return is 10%. -The division's turnover is closest to:

When used in return on investment (ROI)calculations,turnover equals sales divided by average operating assets.

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: -The turnover for this year's investment opportunity considered alone is closest to:

Dacker Products is a division of a major corporation. The following data are for the most recent year of operations: -The division's turnover used to compute ROI is closest to:

An advantage of using ROI to evaluate performance is that it encourages the manager to reduce the investment in operating assets as well as increase net operating income.

Serie Inc. reported the following results from last year's operations: At the beginning of this year, the company has a $2,100,000 investment opportunity with the following characteristics: -The margin for this year's investment opportunity considered alone is closest to:

Cirone 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: If the company pursues the investment opportunity and otherwise performs the same as last year,the combined margin for the entire company will be closest to:

Inspection Time is generally considered to be value-added time.

Robichau 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 20%. -The residual income for this year's investment opportunity when considered alone is closest to:

If a company contains a number of investment centers of differing sizes,return on investment (ROI)should be used rather than residual income to rank the financial performance of the divisions.

The following data has been provided for a company's most recent year of operations: The residual income for the year was 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 turnover is closest to:

Cabell Products is a division of a major corporation. Last year the division had total sales of $25,320,000, net operating income of $1,924,320, and average operating assets of $6,000,000. The company's minimum required rate of return is 10%. -The division's margin is closest to:

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

Robichau 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 20%. -Last year's residual income was closest to:

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

In November,the Universal Solutions Division of Keaffaber Corporation had average operating assets of $480,000 and net operating income of $46,200.The company uses residual income,with a minimum required rate of return of 11%,to evaluate the performance of its divisions.What was the Universal Solutions Division's residual income in November?