Answer the following questions using the information below: The Echuca Electrical Corporation reported the following information for its Coaxial Cables Division: \[\begin{array} { l r } \text { Revenues } & \$ 1000000 \\ \text { Operating costs } & 600000 \\ \text { Taxable income } & 200000 \\ \text { Operating assets } & 500000 \end{array}\] Profit is defined as operating profit. -What is the Coaxial Cables Division's return on sales?

A) 0.20 B) 0.40 C) 0.50 D) 0.60 A) 0.20 B) 0.40 C) 0.50 D) 0.60 B

Answer the following questions using the information below: The top management at Groundscare 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: \[\begin{array} { l r r r } & \text { Tractor Division } & \text { Tiller Division } & \text { Digger Division } \\ \text { Sales } & \$ 5000000 & ( \mathrm { a } ) & \$ 1200000 \\ \text { Net operating profit } & \$ 500000 & \$ 720000 & \$ 300000 \\ \text { Operating assets } & ( \mathrm { b } ) & ( \mathrm { c } ) & \$ 1000000 \\ \text { Return on investment } & 0.20 & 0.10 & ( \mathrm {~d} ) \\ \text { Return on sales } & ( \mathrm { e } ) & 0.12 & 0.25 \\ \text { Investment turnover } & ( \mathrm { f } ) & ( \mathrm { g } ) & 1.2 \end{array}\] -What is the value of the operating assets belonging to the Tiller Division?

A) $6 000 000 B) $5 000 000 C) $7 200 000 D) $7 500 000 A) $6 000 000 B) $5 000 000 C) $7 200 000 D) $7 500 000 C

Answer the following questions using the information below: The Bandage Medical Supply Company has two divisions that operate independently of one another.The financial data for the year 2017 reported the following results: \[\begin{array} { l r r } & \text { North } & \text { South } \\ \text { Sales } & \$ 3000000 & \$ 2500000 \\ \text { Operating profit } & 750000 & 550000 \\ \text { Taxable income } & 650000 & 375000 \\ \text { Investment } & 6000000 & 5000000 \end{array}\] The company's desired rate of return is 10%.Profit is defined as operating profit. -What are the respective return-on-investment ratios for the North and South Divisions?

A) 0.108 and 0.075 B) 0.050 and 0.150 C) 0.125 and 0.110 D) 0.110 and 0.125 A) 0.108 and 0.075 B) 0.050 and 0.150 C) 0.125 and 0.110 D) 0.110 and 0.125

Answer the following questions using the information below: The top management at Watersport Company, a manufacturer of water sport 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: $\begin{array} { l r r r r } & \text { Jetski Division } & \text { Boat Division } & \text { Surfboard Division } \\ \text { Sales } & \$ 7500000 & ( \mathrm { a } ) & \$ 1800000 \\ \text { Net operating profit } & \$ 750000 & \$ 1080000 & \$ 450000 \\ \text { Operating assets } & ( \mathrm { b } ) & ( \mathrm { c } ) & \$ 1500000 \\ \text { Retum on investment } & 0.20 & 0.10 & ( \mathrm {~d} ) \\ \text { Retum on sales } & ( \mathrm { e } ) & 0.12 & 0.25 \\ \text { Investment turnover } & \text { (f) } & ( \mathrm { g } ) & 1.2 \end{array}$ -What is the Jetski Division's return on sales?

A) 0.10 B) 0.15 C) 0.20 D) 0.12 A) 0.10 B) 0.15 C) 0.20 D) 0.12

Answer the following questions using the information below: The top management at Munchie Company,a manufacturer of computer games,is attempting to recover from a flood that destroyed some of their accounting records.The main computer system was also severely damaged.The following information was salvaged: \[\begin{array} { l r r r } & \text { Alpha Division } & \text { Beta Division } & \text { Gamma Division } \\ \text { Sales } & \$ 2500000 & ( \mathrm { a } ) & \$ 1150000 \\ \text { Net operating profit } & \$ 1500000 & \$ 650000 & \$ 575000 \\ \text { Operating assets } & ( \mathrm { b } ) & ( \mathrm { c } ) & \$ 766667 \\ \text { Return on investment } & 0.25 & 0.15 & \text { (d) } \\ \text { Return on sales } & ( \mathrm { e } ) & 0.10 & 0.5 \\ \text { Investment turnover } & ( \mathrm { f } ) & ( \mathrm { g } ) & 1.5 \end{array}\] -What is the Gamma Division's return on investment?

A) 0.25 B) 0.42 C) 0.60 D) 0.75 A) 0.25 B) 0.42 C) 0.60 D) 0.75

Answer the following questions using the information below: The Echuca Electrical Corporation reported the following information for its Coaxial Cables Division: \[\begin{array} { l r } \text { Revenues } & \$ 1000000 \\ \text { Operating costs } & 600000 \\ \text { Taxable income } & 200000 \\ \text { Operating assets } & 500000 \end{array}\] Profit is defined as operating profit. -What is the Coaxial Cables Division's return on investment?

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

Hargrave Products has three divisions,which operate autonomously.Their results for 2017 were as follows: \[\begin{array} { | l | r | r | r | } \hline & { \text { East } } & { \text { West } } & \text { International } \\ \hline \text { Sales } & \$ 30000000 & \$ 40000000 & \$ 50000000 \\ \hline \text { Cost of goods sold } & 15000000 & 25000000 & 37000000 \\ \hline \text { Operating profit } & 4500000 & 4750000 & 5000000 \\ \hline \text { Investment base } & 30000000 & 30500000 & 31000000 \\ \hline \end{array}\] The company's desired rate of return is 15%. Required: a.Compute each division's ROI (round to three decimal places). b.Compute each division's residual income. _____________________________________________________________________________________________ _____________________________________________________________________________________________

a.\[ \begin{aligned} \text { East ROI }

Exam 20: Performance Measurement, Compensation and Multinational Considerations

Answer the following questions using the information below: The Echuca Electrical Corporation reported the following information for its Coaxial Cables Division: Revenues \ 1000000 Operating costs 600000 Taxable income 200000 Operating assets 500000 Profit is defined as operating profit. -What is the Coaxial Cables Division's return on sales?

Free

(Multiple Choice)

4.9/5

(33)

Question 1

Correct Answer:

Verified

B

Answer the following questions using the information below: The top management at Groundscare 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: Tractor Division Tiller Division Digger Division Sales \ 5000000 () \ 1200000 Net operating profit \ 500000 \ 720000 \ 300000 Operating assets () () \ 1000000 Return on investment 0.20 0.10 () Return on sales () 0.12 0.25 Investment turnover () () 1.2 -What is the value of the operating assets belonging to the Tiller Division?

Free

(Multiple Choice)

4.9/5

(34)

Question 2

Correct Answer:

Verified

C

Perth Electronics Company allows its divisions to operate as autonomous units.The operating data for 2017 follow: TVs Photography Computers Revenues \ 4500000 \ 1000000 \ 9600000 Accounts receivable 1600000 305000 2870000 Operating assets 2000000 800000 3500000 Net operating profit 440000 120000 960000 Taxable income 330000 180000 770000 Required: a.Calculate the investment turnover for each division. b.Calculate the return on sales for each division. c.Calculate the return on investment for each division. d.Which division manager is doing best? Why? e.What other factors should be included when evaluating the managers? For parts (b)and (c)income is defined as operating profit. _ _

Free

(Essay)

4.7/5

(44)

Question 3

Correct Answer:

Verified

a. Investment tumover:
$\begin{array}{lll}\text { TVs } & =\$ 4500000 / \$ 2000000=2.25 \\\text { Fhotography } & =\$ 1000000 / \$ 800000=1.25 \\\text { Computers } & =\$ 9600000 / \$ 3500000=2.74\end{array}$

b. Retum on Sales:
$\begin{array}{lll}\text { TVs } & =\$ 440000 / \$ 450000 & =0.10 \\\text { Photography } & =\$ 120000 / \$ 100000 & =0.12 \\\text { Computers } & =\$ 960000 / \$ 9600000 & =0.10\end{array}$

c. ROI:
$\begin{array}{ll} \text { TVs } & =2.25 \times 0.10&=0.225 \\ \text { Photography } & =1.25 \times 0.12 &=0.150\\ \text { Computers } & =2.74 \times 0.10 &=0.274\\\end{array}$
d.Computers' manager had the best performance because Computers had the highest investment turnover,which offset the second-best return on sales.
e.Residual income should be considered and non-controllable factors such as the age of the assets.

Ghan Rail 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%.Ghan Rail's after-tax cost of debt is:

(Multiple Choice)

4.7/5

(40)

Question 4

Canberra Asset Management has three divisions.Each division's required rate of return is 15%.Planned operating results for 2019 are as follows: Division Operating profit Investment \ 22500000 \ 175000000 \ 37500000 \ 187500000 \ 16500000 \ 75000000 The company is planning an expansion,which will require each division to increase its investments by $37 500 000 and its profit by $6 750 000. Required: a.Calculate the current ROI for each division. b.Calculate the current residual income for each division. c.Rank the divisions according to their current ROIs and residual incomes. d.Determine the effects after adding the new project to each division's ROI and residual income. e.Assuming the managers are evaluated on either ROI or residual income,which divisions are pleased with the expansion and which ones are unhappy? _ _

(Essay)

4.8/5

(43)

Question 5

An example of a performance measure with a long-run time horizon is:

(Multiple Choice)

4.9/5

(44)

Question 6

The situation in which an employee prefers to exert less effort compared with the effort desired by the owner because the employee's effort cannot accurately be monitored and enforced is known as a(n):

(Multiple Choice)

5.0/5

(33)

Question 7

Evaluating an executive's performance using the annual return on investment would sharpen an executive's long-run focus.

(True/False)

4.9/5

(36)

Question 8

Ghan Rail 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%.Ghan Rail has two operating divisions,the Blue division and the Gold division,with the following financial measures for the current year: Total Assets Current Liabilities Pperating Profit Blue Div. \ 9500000 \ 2800000 \ 1055000 Gold Div. \ 11000000 \ 2200000 \ 1200000 What is Economic Value Added (EVA)for the Blue Division?

(Multiple Choice)

4.7/5

(44)

Question 9

Tying performance measures more closely to a manager's efforts:

(Multiple Choice)

4.8/5

(38)

Question 10

Answer the following questions using the information below: The Bandage Medical Supply Company has two divisions that operate independently of one another.The financial data for the year 2017 reported the following results: North South Sales \ 3000000 \ 2500000 Operating profit 750000 550000 Taxable income 650000 375000 Investment 6000000 5000000 The company's desired rate of return is 10%.Profit is defined as operating profit. -What are the respective return-on-investment ratios for the North and South Divisions?

(Multiple Choice)

4.9/5

(44)

Question 11

The only criticism of team-based compensation is that the incentives for individual employees to excel are diminished,harming overall performance.

(True/False)

4.8/5

(44)

Question 12

Answer the following questions using the information below: The top management at Watersport Company, a manufacturer of water sport 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: Jetski Division Boat Division Surfboard Division Sales \ 7500000 () \ 1800000 Net operating profit \ 750000 \ 1080000 \ 450000 Operating assets () () \ 1500000 Retum on investment 0.20 0.10 () Retum on sales () 0.12 0.25 Investment turnover (f) () 1.2 -What is the Jetski Division's return on sales?

(Multiple Choice)

4.9/5

(39)

Question 13

Companies are increasingly using non-financial measures to evaluate performance.Since these measures do not come from the company's financial records,why are they used? _ _

(Essay)

4.9/5

(36)

Question 14

Answer the following questions using the information below: The top management at Munchie Company,a manufacturer of computer games,is attempting to recover from a flood that destroyed some of their accounting records.The main computer system was also severely damaged.The following information was salvaged: Alpha Division Beta Division Gamma Division Sales \ 2500000 () \ 1150000 Net operating profit \ 1500000 \ 650000 \ 575000 Operating assets () () \ 766667 Return on investment 0.25 0.15 (d) Return on sales () 0.10 0.5 Investment turnover () () 1.5 -What is the Gamma Division's return on investment?

(Multiple Choice)

4.8/5

(43)

Question 15

During the past 12 months,the Wombat Corporation had a net profit of $39 200.What is the return on investment if the amount of the investment is $280 000?

(Multiple Choice)

4.9/5

(42)

Question 16

Answer the following questions using the information below: The Echuca Electrical Corporation reported the following information for its Coaxial Cables Division: Revenues \ 1000000 Operating costs 600000 Taxable income 200000 Operating assets 500000 Profit is defined as operating profit. -What is the Coaxial Cables Division's return on investment?

(Multiple Choice)

4.8/5

(35)

Question 17

A negative feature of defining investment by excluding the portion of total assets employed that are financed by short-term creditors is that:

(Multiple Choice)

4.9/5

(38)

Question 18

Hargrave Products has three divisions,which operate autonomously.Their results for 2017 were as follows: East West International Sales \ 30000000 \ 40000000 \ 50000000 Cost of goods sold 15000000 25000000 37000000 Operating profit 4500000 4750000 5000000 Investment base 30000000 30500000 31000000 The company's desired rate of return is 15%. Required: a.Compute each division's ROI (round to three decimal places). b.Compute each division's residual income. _ _

(Essay)

4.9/5

(40)

Question 19

A company which favours the residual income approach to measure performance wants managers to:

(Multiple Choice)

4.8/5

(30)

Question 20

Ghan Rail 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%.Ghan Rail's after-tax cost of debt is:

An example of a performance measure with a long-run time horizon is:

The situation in which an employee prefers to exert less effort compared with the effort desired by the owner because the employee's effort cannot accurately be monitored and enforced is known as a(n):

Evaluating an executive's performance using the annual return on investment would sharpen an executive's long-run focus.

Tying performance measures more closely to a manager's efforts:

The only criticism of team-based compensation is that the incentives for individual employees to excel are diminished,harming overall performance.

Companies are increasingly using non-financial measures to evaluate performance.Since these measures do not come from the company's financial records,why are they used? _ _

During the past 12 months,the Wombat Corporation had a net profit of $39 200.What is the return on investment if the amount of the investment is $280 000?

A negative feature of defining investment by excluding the portion of total assets employed that are financed by short-term creditors is that:

A company which favours the residual income approach to measure performance wants managers to:

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

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

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Measuring and Reporting Sustainability

Filters