Question 1

Which of the following is the correct formula for return on sales?

Accepted Answer

A) Income / Investment 
B) Investment / Income 
C) Income / Revenue 
D) Revenue / Investment 
A) Income / Investment 
B) Investment / Income 
C) Income / Revenue 
D) Revenue / Investment C

Question 2

Boundary systems describe standards of behavior and codes of conduct expected of all employees, especially actions that are off-limits.

Accepted Answer

A) True 
 B)False  True

Question 3

Discuss the issues and complications that may arise when multinational corporations conduct performance measurement and comparisons among divisions located in different countries.

Accepted Answer

There are wide differences in legal, political, social, and cultural environments among countries.

Question 4

Which of the following statements is true?

Accepted Answer

A) The economic, legal, political, social, and cultural environments differ across countries. 
B) Governments in some countries may impose controls and limit selling prices of a company's products. 
C) Because of advances in telecommunications and transportation, the availability of materials and skilled labor does not differ significantly across countries. 
D) Both A and B are correct. 
A) The economic, legal, political, social, and cultural environments differ across countries. 
B) Governments in some countries may impose controls and limit selling prices of a company's products. 
C) Because of advances in telecommunications and transportation, the availability of materials and skilled labor does not differ significantly across countries. 
D) Both A and B are correct.

Question 5

In performance evaluations:

Accepted Answer

A) the performance of the division prior to the manager assuming control should be considered 
B) economic conditions for the specific industry should not be considered 
C) to have an effective and fair evaluation, a manager should be evaluated over several time periods 
D) Both A and C are correct. 
A) the performance of the division prior to the manager assuming control should be considered 
B) economic conditions for the specific industry should not be considered 
C) to have an effective and fair evaluation, a manager should be evaluated over several time periods 
D) Both A and C are correct.

Question 6

Answer the following questions using the information below:
The Cybertronics Corporation reported the following information for its Cyclotron Division:
   Income is defined as operating income.
-What is the Cyclotron Division's return on investment?

Accepted Answer

A) 0.2 
B) 0.4 
C) 0.5 
D) 0.8 
A) 0.2 
B) 0.4 
C) 0.5 
D) 0.8

Question 7

A part of a control system that attempts to focus an organization's attention and learning on key strategic issues is known as a(n):

Accepted Answer

A) diagnostic control system 
B) boundary system 
C) belief system 
D) interactive control system 
A) diagnostic control system 
B) boundary system 
C) belief system 
D) interactive control system

Question 8

The objective of maximizing return on investment may induce managers of highly profitable divisions to reject projects that from the viewpoint of the overall organization should be accepted.

Accepted Answer

A) True 
 B)False

Question 9

Coptermagic Company supplies helicopters to corporate clients. Coptermagic has two sources of funds: long term debt with a market and book value of $32 million issued at an interest rate of 10%, and equity capital that has a market value of $18 million (book value of $8 million). The cost of equity capital for Coptermagic is 15%, and its tax rate is 30%. Coptermagic has profit centers in four divisions that operate autonomously. The company's results for 2008 are as follows:
   Required:
a. Compute Coptermagic's weighted average cost of capital.
b. Compute each division's Economic Value Added.
c. Rank the divisions by EVA.

Accepted Answer

a. WACC = [(.10 x (1 - .30)x $

Question 10

The return on investment is usually considered the most popular approach to incorporating the investment base into a performance measure because:

Accepted Answer

A) it blends all the ingredients of profitability into a single percentage 
B) once determined, there is no need to use it with other measures of performance 
C) it is similar to the company's price earnings ratio because a corporation's return on investment appears every day in The Wall Street Journal 
D) Both A and C are correct. 
A) it blends all the ingredients of profitability into a single percentage 
B) once determined, there is no need to use it with other measures of performance 
C) it is similar to the company's price earnings ratio because a corporation's return on investment appears every day in The Wall Street Journal 
D) Both A and C are correct.

Question 11

Answer the following questions using the information below:
Carriage Incorporated manufactures horse 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 2009:
   The company is currently using a 12% required rate of return.
-What are Wheels's and Assembly's return on investment based on book values, respectively?

Accepted Answer

A) 0.21; 0.25 
B) 0.25; 0.21 
C) 0.14; 0.25 
D) 0.25; 0.14 
A) 0.21; 0.25 
B) 0.25; 0.21 
C) 0.14; 0.25 
D) 0.25; 0.14

Question 12

Answer the following questions using the information below:
The top management at Groundsource Company, a manufacturer of lawn and garden equipment, is attempting to recover from a fire that destroyed some of their accounting records. The main computer system was also severely damaged. The following information was salvaged:
  
-What is the Tractor Division's investment turnover?

Accepted Answer

A) .50 
B) 1.0 
C) 2.0 
D) 2.5 
A) .50 
B) 1.0 
C) 2.0 
D) 2.5

Question 13

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

Accepted Answer

A) diagnostic controls have been found to lead to poor financial performance 
B) diagnostic controls have no place in a Balanced Scorecard system 
C) pressure to perform on diagnostic controls may lead to unethical behavior 
D) they are mandated by the Financial Accounting Standards Board 
A) diagnostic controls have been found to lead to poor financial performance 
B) diagnostic controls have no place in a Balanced Scorecard system 
C) pressure to perform on diagnostic controls may lead to unethical behavior 
D) they are mandated by the Financial Accounting Standards Board

Question 14

Managers only employ one task as a part of their job, and thus evaluation of how well they do is simple to accomplish.

Accepted Answer

A) True 
 B)False

Question 15

Bob's Cellular Phone Company uses ROI to measure divisional performance. Annual ROI calculations for each division have traditionally employed the ending amount of invested capital along with annual operating income and net revenue. The Dupont method is generally used. The company's Phone Accessories Division had the following results for the last two years:
20X5 ROI = ($2,000,000/$20,000,000)× ($20,000,000/$10,000,000)= 0.20
20X6 ROI = ($2,400,000/$25,000,000)× ($25,000,000/$15,000,000)= 0.16
Corporate management was disappointed in the performance of the division for 20X6, since it had made an additional investment in the division that was budgeted for a 23% ROI.
Required:
a. Discuss some factors that may have contributed to the decrease in ROI for 20X6.
b. Would there have been any substantial difference if average capital had been used?

Accepted Answer

a. While sales increased by 25%, net inc

Question 16

Residual income is a better evaluation method than return on investment because it has a lower required rate of return for the company projects than return on investment does.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

The four levers of control are diagnosti

Question 18

Answer the following questions using the information below:
Waldorf Company has two sources of funds: long-term debt with a market and book value of $5 million issued at an interest rate of 12%, and equity capital that has a market value of $4 million (book value of $2 million). Waldorf Company has profit centers in the following locations with the following operating incomes, total assets, and current liabilities. The cost of equity capital is 12%, while the tax rate is 25%.
  
-What is the EVA® for St. Louis?

Accepted Answer

A) $127,870 
B) $163,730 
C) $196,270 
D) $360,000 
A) $127,870 
B) $163,730 
C) $196,270 
D) $360,000

Question 19

In an Economic Value Added calculation, the appropriate measure of a division's profit would be that division's pre-tax operating income.

Accepted Answer

A) True 
 B)False

Question 20

Investment turnover is calculated as revenue divided by investment.

Accepted Answer

A) True 
 B)False

Which of the following is the correct formula for return on sales?

Boundary systems describe standards of behavior and codes of conduct expected of all employees, especially actions that are off-limits.

Discuss the issues and complications that may arise when multinational corporations conduct performance measurement and comparisons among divisions located in different countries.

Which of the following statements is true?

In performance evaluations:

Answer the following questions using the information below: The Cybertronics Corporation reported the following information for its Cyclotron Division: Income is defined as operating income. -What is the Cyclotron Division's return on investment?

A part of a control system that attempts to focus an organization's attention and learning on key strategic issues is known as a(n):

The objective of maximizing return on investment may induce managers of highly profitable divisions to reject projects that from the viewpoint of the overall organization should be accepted.

The return on investment is usually considered the most popular approach to incorporating the investment base into a performance measure because:

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

Managers only employ one task as a part of their job, and thus evaluation of how well they do is simple to accomplish.

Residual income is a better evaluation method than return on investment because it has a lower required rate of return for the company projects than return on investment does.

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

In an Economic Value Added calculation, the appropriate measure of a division's profit would be that division's pre-tax operating income.

Investment turnover is calculated as revenue divided by investment.

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Filters

Exam 23: Performance Measurement, Compensation, and Multinational Considerations

Which of the following is the correct formula for return on sales?

Boundary systems describe standards of behavior and codes of conduct expected of all employees, especially actions that are off-limits.

Discuss the issues and complications that may arise when multinational corporations conduct performance measurement and comparisons among divisions located in different countries.

Which of the following statements is true?

In performance evaluations:

Answer the following questions using the information below: The Cybertronics Corporation reported the following information for its Cyclotron Division: Income is defined as operating income. -What is the Cyclotron Division's return on investment?

A part of a control system that attempts to focus an organization's attention and learning on key strategic issues is known as a(n):

The objective of maximizing return on investment may induce managers of highly profitable divisions to reject projects that from the viewpoint of the overall organization should be accepted.

The return on investment is usually considered the most popular approach to incorporating the investment base into a performance measure because:

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

Managers only employ one task as a part of their job, and thus evaluation of how well they do is simple to accomplish.

Residual income is a better evaluation method than return on investment because it has a lower required rate of return for the company projects than return on investment does.

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

In an Economic Value Added calculation, the appropriate measure of a division's profit would be that division's pre-tax operating income.

Investment turnover is calculated as revenue divided by investment.

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Filters