Exam 11: How Do Managers Evaluate Performance in Decentralized Organizations

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Katsen Company can sell its products to an external market for $150 per unit.The division's variable manufacturing costs are $45 per unit and fixed manufacturing costs are $9 per unit.If the division is operating at full capacity,what would be the opportunity cost of selling internally?

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Attley Inc.has three separate divisions: Division A,Division B,and Division C.Information about the three divisions follows: Attley Inc.has three separate divisions: Division A,Division B,and Division C.Information about the three divisions follows:   The company has recently implemented a new performance evaluation system.Based on this new system,a division manager would only receive a bonus if the ROI of the division was greater than 25% and residual income was in excess of $20,000.If management uses a cost of capital rate of 18%,which division manager(s)would be eligible for a bonus? The company has recently implemented a new performance evaluation system.Based on this new system,a division manager would only receive a bonus if the ROI of the division was greater than 25% and residual income was in excess of $20,000.If management uses a cost of capital rate of 18%,which division manager(s)would be eligible for a bonus?

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Exhibit 11-2 Manford Inc.has two divisions - Refrigerators and Dish Washer. Exhibit 11-2 Manford Inc.has two divisions - Refrigerators and Dish Washer.    -Refer to Exhibit 11-2.Assume the Dish Washer Division has average operating assets totaling $6,560,000 for the year and the company's cost of capital rate is 15 percent.What is the residual income for the Dish Washer division? -Refer to Exhibit 11-2.Assume the Dish Washer Division has average operating assets totaling $6,560,000 for the year and the company's cost of capital rate is 15 percent.What is the residual income for the Dish Washer division?

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