Exam 22: Multinational Performance Measurement and Compensation

Use the information below to answer the following question(s).Thacker Company has two regional offices.The information for each is as follows: -An automotive dealership, with a book value of $3,000,000, and total assets of $5,000,000, has a long history of earning 18%.Last year, the company earned $900,000.The owner is considering acquiring another dealership in a nearby town.If the expansion increases income by 50%, what is the maximum amount of investment the owner can make in the new dealership in order to maintain his desired 18% return?

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's and Assembly's residual incomes based on current values, respectively?

Measurement of one group's performance against the best possible level of performance exhibited by another group, either inside or outside the organization, is known as

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 were the sales for the Tiller Division?

Provide the missing data for the following situations:

Measures which monitor critical performance variables that help managers track progress toward achieving a company's strategic goals are collectively called diagnostic control systems.

Economic value added is after-tax operating income minus (required rate of return times total assets).

Which type of compensation is most prevalent when a satisfactory performance measure cannot be designed?

The following data are available for a manufacturing business started as a new company four years ago when the construction cost index was 110: * = "of long-term assets at historical cost" Required: Calculate the return on investment and the residual income for year five based on current cost.The company's required rate of return is 12%.

Use the information below to answer the following question(s).The following data are available for a heating, ventilating, and air conditioning (HVAC)vent manufacturer started as a new company four years ago when the construction cost index was 120: * = "of long-term assets at historical cost" -What is the ROI using current cost?

Which of the following is the LEAST typical balanced scorecard measure?

Alpine Ltd.has two divisions.Division A manufactures components that can be sold in the external market place or transferred to Division B for further processing.The following data relate to Division A's component product. The capacity of the plant is 2,500 units per year.Division B has offered to purchase 350 units from Division A at a price of $1,600/unit, which is the market price of the component.The manager of Division A has refused this offer stating that it would only return a rate of 25.00%, when the divisional target return on sales is 28.00%.The Division A manager also states that additional fixed costs of $195,000 would be required to produce the 350 units.The corporate required rate of return is 18% of assets and the existing asset base in Division A is $2,500,000.Required: a.How many units must Division A sell in order to achieve its required ROR? What profit margin would be earned at this level of sales? b.Assume Division A currently sells 2,000 units to the external market and can accept Division B's offer without affecting its external sales.Evaluate the refusal of Division B's offer from the standpoint of the corporation as a whole and from Division A manager's perspective. c.Assume Division A currently sells 2,000 units to the external market and can accept Division B's offer without affecting its external sales.Calculate Division A's residual income with and without the sale to Division B. d.What recommendations would you give to the President of Alpine Ltd.with respect to performance evaluation of the divisions?

Briefly explain each of the four levers of control.Why does a company need to implement more than a diagnostic control system?

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 is the Alpha Division's investment turnover?

Paymaster Company provided the following information for the year just ended. What is the return on investment?

Which of the following performance measures is more likely to promote goal congruence?

Use the information below to answer the following question(s).Brandorf Company has two sources of funds: long term debt with a market and book value of $9 million issued at an interest rate of 10 percent; and, equity capital that has a market value of $6 million (book value of $2 million).The cost of equity capital is 5 percent, while the tax rate is 30 percent.Brandorf Company has profit centres in the following locations with the following data: -What is EVA for Regina?

A division within a firm has an average return on assets employed of 12% and is considering purchasing a new asset.The new asset is expected to generate cash flows of $17,000 per year for the next seven years but these have a beta coefficient of 1.3 compared to the portfolio return on the other assets in the division.The risk free rate of return is 2%; the weighted average cost of capital is 9%; and, the cost of the new asset is $170,000. -If the division manager's bonus depends on division ROI will she be likely to purchase the asset?

Many common performance measures rely on internal financial and accounting information.

Use the information below to answer the following question(s).The following data are available for a heating, ventilating, and air conditioning (HVAC)vent manufacturer started as a new company four years ago when the construction cost index was 120: * = "of long-term assets at historical cost" -What is the year 4 operating income using year-4 current cost amortization?