Exam 23: Performance Measurement, Compensation, and Multinational Considerations

Answer the following questions using the information below: Ruth Cleaning Products manufactures home cleaning products. The company has two divisions, Bleach and Cleanser. Because of different accounting methods and inflation rates, the company is considering multiple evaluation measures. The following information is provided for 20X5: The company is currently using a 15% required rate of return. -What are Bleach's and Cleanser's return on investment based on book values, respectively?

(Multiple Choice)

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Question 81

Springfield Corporation, whose tax rate is 40%, has two sources of funds: long-term debt with a market value of $8,000,000 and an interest rate of 8%, and equity capital with a market value of $12,000,000 and a cost of equity of 12%. Springfield's after-tax cost of debt is:

(Multiple Choice)

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Question 82

A major weakness of comparing two companies using only operating incomes as the basis of comparison is this method ignores differences in the size of the investment required to earn the operating income.

(True/False)

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Question 83

Some companies present financial and nonfinancial performance measures for various organization units in a single report called the "balanced scorecard."

(True/False)

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Question 84

Residual income calculations are similar to EVA® calculations because in each calculation there is a charge for the division's invested capital which is deducted from a measure of that division's profit.

(True/False)

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Question 85

In an Economic Added Value calculation, the corporate charge for a division's investment is based on a weighted average of the after-tax interest rate on the firm's debt and the cost of the firm's equity.

(True/False)

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Question 86

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 value of the operating assets belonging to the Tiller Division?

(Multiple Choice)

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Question 87

Using residual income as a measure of performance rather than return on investment promotes goal congruence because residual income:

(Multiple Choice)

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Question 88

Which of the following is a difference between a diagnostic control system and an interactive control system?

(Multiple Choice)

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Question 89

The economic value added concept has attracted considerable attention in recent years. Explain the attractiveness of this number as a measure of performance.

(Essay)

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Question 90

Answer the following questions 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 centers 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 EVA® for Stonybrook?

(Multiple Choice)

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Question 91

A firm will see a difference in the return on investment amount depending if they use historical cost or current cost valuation methods for the assets.

(True/False)

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Question 92

Another term for benchmarking is a relative performance evaluation.

(True/False)

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Question 93

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 were the sales for the Tiller Division?

(Multiple Choice)

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Question 94

Return on investment is also called the accrual accounting rate of return.

(True/False)

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Question 95

Which of the following statements about designing an accounting-based performance measure is FALSE?

(Multiple Choice)

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Question 96

Using net book value as an investment base will result in a lower ROI than using gross book value as an investment base.

(True/False)

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Question 97

When using the historical cost of assets for calculation of return on investment, is it better to use the gross book value of the assets or the net book value of the assets ? Discuss.

(Essay)

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Question 98

Managers use ________ to create an ongoing dialog around the organization's key strategic issues to personally involve themselves in subordinates' decision-making activities.

(Multiple Choice)

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Question 99

Managers usually use the term return on investment to evaluate:

(Multiple Choice)

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Question 100

Showing 81 - 100 of 139

Springfield Corporation, whose tax rate is 40%, has two sources of funds: long-term debt with a market value of $8,000,000 and an interest rate of 8%, and equity capital with a market value of $12,000,000 and a cost of equity of 12%. Springfield's after-tax cost of debt is:

A major weakness of comparing two companies using only operating incomes as the basis of comparison is this method ignores differences in the size of the investment required to earn the operating income.

Some companies present financial and nonfinancial performance measures for various organization units in a single report called the "balanced scorecard."

Residual income calculations are similar to EVA® calculations because in each calculation there is a charge for the division's invested capital which is deducted from a measure of that division's profit.

In an Economic Added Value calculation, the corporate charge for a division's investment is based on a weighted average of the after-tax interest rate on the firm's debt and the cost of the firm's equity.

Using residual income as a measure of performance rather than return on investment promotes goal congruence because residual income:

Which of the following is a difference between a diagnostic control system and an interactive control system?

The economic value added concept has attracted considerable attention in recent years. Explain the attractiveness of this number as a measure of performance.

A firm will see a difference in the return on investment amount depending if they use historical cost or current cost valuation methods for the assets.

Another term for benchmarking is a relative performance evaluation.

Return on investment is also called the accrual accounting rate of return.

Which of the following statements about designing an accounting-based performance measure is FALSE?

Using net book value as an investment base will result in a lower ROI than using gross book value as an investment base.

When using the historical cost of assets for calculation of return on investment, is it better to use the gross book value of the assets or the net book value of the assets ? Discuss.

Managers use ________ to create an ongoing dialog around the organization's key strategic issues to personally involve themselves in subordinates' decision-making activities.

Managers usually use the term return on investment to evaluate:

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

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