Exam 12: Performance Evaluation and Decentralization

The Engine Division provides engines for the Tractor Division of a company. The standard unit costs for Engine Division are: The engine department has excess capacity. What is the best transfer price to avoid transfer price problems?

-Refer to Figure 12-5. What are the average operating assets for Division C?

At the beginning of the year, the value of operating assets was $263,000. At the end of the year, the value of operating assets was $336,000. Monfett Manufacturing requires a minimum rate of return of 15%. Total capital employed equal $350,000 and actual cost of capital is 6%. -Refer to Figure 12-7. Calculate the following: A. Residual income B. EVA

Several transfer pricing policies are used in practice. These transfer pricing policies include

Sales \ 185,000 Operating income \ 60,000 Operating assets \ 375,000 The manager can invest in an additional project that would require $40,000 investment in additional assets and would generate $6,000 of additional income. The company's minimum rate of return is 14%. -Refer to Figure 12-2. What is the residual income for Stock Division with the additional project?

The Auto Division of Big Department Store had a net operating income of $560,000, a net asset base of $4,000,000, and a required rate of return of 12%. Sales for the period totaled $3,000,000. The residual income for the period is

The Engine Division provides engines for the Tractor Division of a company. The standard unit costs for Engine Division are: What is the transfer price based on full cost plus a markup of 30%?

Decentralization is usually achieved by creating units called divisions.

MCE (manufacturing cycle efficiency) is calculated using the following formula:

Unlike ROI, residual income does not encourage a short-run orientation.

A responsibility center in which a manager is responsible for both revenues and costs is a(n)

Select the term from below to match with the correct statement. -A(n) ___________ is a responsibility center in which a manager is responsible for revenues, costs, and investments.

Porter Company makes children's board games. One popular game requires the following amounts of time: processing - 2 hours; waiting - 6 hours; moving - 4 hours. The Manufacturing Cycle Efficiency (MCE) for Porter Company is

Residual income is the difference between operating income and the product of the hurdle rate and the company's average operating assets.

The decision-making approach that allows managers at lower levels to make and implement key decisions pertaining to their areas of responsibility is

Chase Company had the following income statement for last year: Beginning assets were $279,500 and ending assets were $296,500.

_____________ is the ratio of operating income to sales.

How is EVA (Economic Value Added) different from standard residual income calculations?

The difference between realization and sacrifice defines

A responsibility center in which a manager is responsible for revenues, cost, and investment is a(n)