Exam 22: Multinational Performance Measurement and Compensation

Use the information below to answer the following question(s).The top management at Groundsource Company, a manufacturer of lawn and garden equipment, is attempting to recover from a flood, which destroyed some of its accounting records.The main computer system was also severely damaged.The following information was salvaged: -What is the Tiller Division's investment turnover?

Answer the following question(s)using the information below: Carriage Ltd.manufactures baby carriages.The company has two divisions, Wheels and Assembly.Because of different accounting methods and inflation rates, the company is considering multiple evaluation measures.The following information is provided for the year just ended: The company is currently using a 12% required rate of return. -What are Wheels and Assembly Divisions' return on investment based on book values, respectively?

The "four levers" of control are operating profit before taxes, return on investment, residual income, and economic value added.

"Levers of control," in addition to a diagnostic control system, are needed in an organization because

Use the information below to answer the following question(s).The following data are available for a foundry operation started as a new company four years ago when the construction cost index was 125: * = "of long-term assets at historical cost" -What is the current cost annual depreciation in year 4 dollars?

The timing of feedback depends on the level of management that receives the information and on the complexity of the organization's information technology.

Comparing the performance of divisions of a multinational company operating in different countries is difficult because of the differences in economic, legal, political, social and cultural environments.

Answer the following question(s)using the information below: Miller Medical Services provided the following information for it past year's operations in its Hospital Bed Division. -What is the Hospital Bed Division's asset turnover?

Return on sales is calculated by dividing net income by revenues.

Current cost is defined as the cost of purchasing an asset today identical to the one currently held.Required: Discuss why this is a useful concept and explain some difficulties in its use.

Capital Investments has three divisions.Each division's required rate of return is 15 percent.Planned operating results for next year are: The company is planning an expansion requiring each division to increase its investments by $25,000,000 and its income by $4,500,000.Required: a.Compute the current ROI for each division. b.Compute the current residual income for each division. c.Rank the divisions according to their current ROIs and residual incomes. d.Determine the effects after adding the new project to each division's ROI and residual income. e.Which Divisions are pleased with the addition and which ones are unhappy assuming the managers are evaluated on a combination of ROI and residual income? Is a combination of ROI and residual income appropriate for the divisions?

Use the information below to answer the following question(s).The top management at Munchie Company, a manufacturer of computer games, is attempting to recover from a flood, which destroyed some of its accounting records.The main computer system was also severely damaged.The following information was salvaged: -What were the sales for Beta Division?

Wylie Construction Supplies Ltd.is preparing the budget for the upcoming year and planning the size of the executive bonus pool.The following table presents budget amounts and their respective probabilities: The VP Finance is interested in determining the size of the bonus pool for the executive team.The base bonus pool is 10% of operating income, if the company reaches the budget.In addition the VP Finance would like to recommend an additional 20% incentive bonus based on operating income in excess of the budget.Required: 1.Prepare a budget income statement, in contribution margin format, based on the expected values for sales, variable costs, and fixed costs.2.What is the maximum amount that should be budgeted for the executive bonus pool?

The benefits of tying performance measures more closely to a manager's efforts encourage the use of

A report that measures financial and nonfinancial performance measures for various organization units in a single report is called a (n)

How should environmental and ethical issues affect managers' performance evaluations?

R & D Storage is a small, but diversified, moving and storage company.In recent years its corporate income has declined to unacceptable levels.To change the direction of the company, the board of directors hired a new chief executive officer.She is currently considering three alternative ways as to how division managers are rewarded for their performance.They are; ROI, RI, and EVA.Required: Evaluate the CEO's plans by comparing the similarities and differences of the three methods.

The cost of capital that is recognized in a residual income calculation is also call the

Residual income is income plus an imputed interest charge for the investment.

Answer the following question(s)using the information below: Coldbrook Company has two sources of funds: long-term debt with a market and book value of $15 million issued at an interest rate of 10%, and equity capital that has a market value of $9 million (book value of $5 million).Coldbrook Company has profit centres in the following locations with the following operating incomes, total assets, and current liabilities.The cost of equity capital is 15%, while the tax rate is 30%. -What is the for Stonybrook?