Exam 11: Performance Evaluation and the Balanced Scorecard

Residual income is used in the denominator when calculating ROI.

Decentralization helps keep a company's costs down since each business unit may have its own purchasing department.

Assume the Cell Phone Division of the First Electronics Corporation had the following results last year (in thousands).Management's target rate of return is 10% and the weighted average cost of capital is 7%.Its effective tax rate is 30%. Sales \ 6,000,000 Operating income 900,000 Total assets 3,000,000 Current liabilities 750,000 - What is the division's sales margin?

Describe the limitations of financial performance measurement.

The Beverage Division of Natural Foods Corporation had sales of $4,200,000 and operating income of $840,000 last year.The total assets of the Beverage Division were $1,680,000,while current liabilities were $360,000.Natural Foods Corporation's target rate of return is 9%,while its weighted average cost of capital is 7%.The effective tax rate for the company is 40%. -What is the Beverage Division's Economic Value Added (EVA)?

KPI in the Balanced Scorecard stands for Key Performance Indicator.

Responsibility accounting performance reports capture the financial performance of cost,revenue and profit centers.

Capital turnover is calculated as sales divided by total assets.

The manager of the accounting department at Nike would be in charge of a(n):

Selected financial data for The Plastic Lumber Company's Outdoor Furniture Division is as follows: Sales \ 2,100,000 Operating income \ 420,000 Total assets \ 1,050,000 Current liabilities \ 200,000 Target rate of return 12\% Weighted average cost of capital 10\% -What is The Plastic Lumber Company's Outdoor Furniture Division return on investment?

Rose Company has a target rate of return of 10%,an ROI of 36%,and capital turnover of 3.0.The sales margin for Rose Company would be closest to:

The manager of the corporate division of Hollister would be in charge of a(n):

Flash Corporation has operating income of $180,000,a sales margin of 15%,and capital turnover of 2.0.The return on investment (ROI)for Flash Corporation would be closest to:

Comparing a company's achievements against best practices in the industry is called benchmarking.

The manager of the Walt Disney World Resorts (a corporate division)would be in charge of a(n):

Economic Value Added (EVA)is a special type of Return on Investment (ROI)calculation.

Management by exception would dictate that the manager investigate which of the following variances?

Powell Enterprises has operating income of $72,000.Its return on investment (ROI)is 36%,while its target rate of return is 10%.The total assets of Powell Enterprises would be closest to:

Companies benchmark their performance against the performance of their competitors and against their own past performance.

What is it called when managers look at the size of the variances between actual results and budgeted amounts in order to determine which variances should be investigated?