Exam 11: Performance Evaluation and the Balanced Scorecard

Companies evaluate investment centers the way they evaluate profit centers.

The performance evaluation of a cost center is typically based on its:

Companies that decentralize split their operations into different divisions or operating units.

The Tandem division of the Great Adventures Cycles Company had the following results last year (in thousands). Sales \ 4,000,000 Operating incare \ 480,000 Total assets \ 2,000,000 Current liabilities \ 300,000 Management's target rate of return is 10% and the weighted average cost of capital is 8%.Its effective tax rate is 40%. - What is the Tandem division's capital turnover?

Small companies tend to use centralized decision making.

The number of warranty claims would be an example of the:

Selected financial data for the Entertainment Division of Magic Enterprises is as follows: Sales \ 7,200,000 Operating income \ 1,440,000 Total assets \ 3,000,000 Curgent liabilities \ 800,000 Required rate of return 8\% Weighted average cost of capital 6\% - What is the Entertainment Division's capital turnover?

The laundry department for a Ritz-Carlton hotel is likely to be classified as a(n):

An amusement park's games department which reports revenues and expenses is likely to be classified as a(n):

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 Return on Investment (ROI)?

The production line at Dell Computers is most likely treated as a(n):

All four perspectives must be included on each individual company's balanced scorecard.

Cost center performance reports typically focus on the static budget variance.

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 Return on Investment (ROI)?

Which of the following financial performance measures can be used to compare potential projects of different sizes?

The reservations department for a hotel chain is likely to be classified as a(n):

Which of the following goals of a performance evaluation system is accomplished when subunit performance targets are aligned with company strategy?

Duplication of costs is a disadvantage of decentralized organizations.

Selle had the following financial results for last month.What type of responsibility center do these results reflect? Selle Co.- Subunit X Flexible Sales Static Revenue by Budget Flexible Volume (Master) Product Actual Variance Budget Variance Budget WD-40 \ 630,000 \ 10,000 \ 620,000 \ 20,000 \ 600,000 WD-60 520,000 30,000 550,000 40,000 510,000 WD-80 125,000 5,000 130,000 10,000 140,000 QD-40 225,000 25,000 200,000 40,000 240,000 QD-60 425,000 5,000 420,000 20,000 400,000 Total \ 1.925.000 \ 5.000 \ 1.920,000 \ 30.000 \ 1.890.000

The Frozen Foods Division of AgraFoods Corporation had sales of $8,400,000 and operating income of $1,848,000 last year.The total assets of the Frozen Foods Division were $3,500,000,while current liabilities were $850,000.AgraFoods Corporation's target rate of return is 12%,while its weighted average cost of capital is 8%.The effective tax rate for the company is 40%. Required: a.Calculate the sales margin. b.Calculate the capital turnover. c.Calculate the return on investment (ROI). d.Calculate the residual income. e.Calculate the Economic Value Added (EVA).