Question 1

The cost today of purchasing an asset identical to the one currently held is called a(n)

Accepted Answer

A) actual cost. 
B) current cost. 
C) dual cost. 
D) fixed cost. 
E) sunk cost. 
A) actual cost. 
B) current cost. 
C) dual cost. 
D) fixed cost. 
E) sunk cost.

Question 2

In establishing performance measures and compensation policy,the issues are interdependent and the decision maker may proceed through a series of decisions several times before selecting the performance measure(s).

Accepted Answer

A) True 
 B)False

Question 3

Measures which monitor critical performance variables that help managers track progress toward achieving a company's strategic goals are collectively called diagnostic control systems.

Accepted Answer

A) True 
 B)False

Question 4

The "four levers" of control are operating profit before taxes,return on investment,residual income,and economic value added.

Accepted Answer

A) True 
 B)False

Question 5

The DuPont method of profitability analysis is

Accepted Answer

A) TA - CL/operating income 
B) ROI × WACC 
C) [revenue/investment] × [income/revenue] 
D) ROI/WACC 
E) ROI × RI 
A) TA - CL/operating income 
B) ROI × WACC 
C) [revenue/investment] × [income/revenue] 
D) ROI/WACC 
E) ROI × RI

Question 6

Hargrave Products has three divisions which operate autonomously.Their results for the current year were as follows:
   
The company's desired rate of return is 15 percent.
Required:
a.Compute each division's ROI.Round to three decimal places.
b.Compute each division's residual income.
c.Rank each division by both ROI and residual income.

Accepted Answer

East ROI = $4,500,000 /$30,000

Question 7

The Irnakk Corporation manufactures iPod covers in Canada and China.The operations are organized as decentralized divisions.The following information is available for the year just ended:
   
The exchange rate at the time of Irnakk's investment (the end of the previous year)in China was 7.5 Chinese yuan = $1 Canadian.During the year,the yuan declined steadily in value and the exchange rate at the end of the current year was 8.5 yuan = $1 Canadian.The average exchange rate during the year was 8 yuan = $1 Canadian.
Required:
a.Calculate the Canadian Division's ROI for last year based on dollars.
b.Calculate the Chinese Division's ROI for last year based on yuan.
c.Which of Irnakk's two divisions earned the better ROI? Explain your answer,complete with supporting calculations showing the China Division ROI in Canadian dollars.

Accepted Answer

a.Canadian Division's ROI for the year =

Question 8

Benchmarks represent 'best practices',and can be derived from either inside or outside the organization.

Accepted Answer

A) True 
 B)False

Question 9

Answer the following question(s)using the information below:
Carriage Ltd.manufactures baby 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 the year just ended:
   The company is currently using a 12% required rate of return.
-What are Wheels's and Assembly's residual incomes based on current values,respectively?

Accepted Answer

A) $70,000;$28,500 
B) $94,000;$28,500 
C) $94,000;$70,000 
D) $28,500;$94,000 
E) $61,800;$70,000 
A) $70,000;$28,500 
B) $94,000;$28,500 
C) $94,000;$70,000 
D) $28,500;$94,000 
E) $61,800;$70,000

Question 10

Use the information below to answer the following question(s).
The top management at Groundsource Company,a manufacturer of lawn and garden equipment,is attempting to recover from a flood,which destroyed some of its accounting records.The main computer system was also severely damaged.The following information was salvaged:
  
-What is the value of the total assets belonging to the Tiller Division?

Accepted Answer

A) $10,000,000 
B) $ 12,000,000 
C) $ 14,400,000 
D) $ 15,000,000 
E) $ 16,000,000 
A) $10,000,000 
B) $ 12,000,000 
C) $ 14,400,000 
D) $ 15,000,000 
E) $ 16,000,000

Question 11

A company has total assets of $500,000,a required rate of return of 10%,and operating income for the year was $200,000.What is the residual income?

Accepted Answer

A) $150,000 
B) $200,000 
C) $250,000 
D) $480,000 
E) $175,000 
A) $150,000 
B) $200,000 
C) $250,000 
D) $480,000 
E) $175,000

Question 12

For the period just ended,Trident Ltd.reported profit of $22.6 million and invested capital of $250 million.Assuming an imputed interest rate of 8%,which of the following choices correctly denotes Trident's return on investment (ROI)and residual income respectively?

Accepted Answer

A) 8.32%;$20.792 million 
B) 9.04%;$20,792 million 
C) 9.76%;$4.408 million 
D) 9.04%;$2.6 million 
E) 9.76%;$2.6 million 
A) 8.32%;$20.792 million 
B) 9.04%;$20,792 million 
C) 9.76%;$4.408 million 
D) 9.04%;$2.6 million 
E) 9.76%;$2.6 million

Question 13

Use the information below to answer the following question(s).
Brandorf Company has two sources of funds: long term debt with a market and book value of $9 million issued at an interest rate of 10 percent;and,equity capital that has a market value of $6 million (book value of $2 million).The cost of equity capital is 5 percent,while the tax rate is 30 percent.Brandorf Company has profit centres in the following locations with the following data:
  
-What is EVA for Ottawa?

Accepted Answer

A) $218,200 
B) $362,200 
C) $163,200 
D) $480,000 
E) $140,000 
A) $218,200 
B) $362,200 
C) $163,200 
D) $480,000 
E) $140,000

Question 14

Answer the following question(s)using the information below:
Carriage Ltd.manufactures baby 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 the year just ended:
   The company is currently using a 12% required rate of return.
-What are Wheels's and Assembly's return on investment based on current values,respectively?

Accepted Answer

A) 0.21;0.25 
B) 0.25;0.21 
C) 0.14;0.29 
D) 0.29;0.14 
E) 0.33;0.23 
A) 0.21;0.25 
B) 0.25;0.21 
C) 0.14;0.29 
D) 0.29;0.14 
E) 0.33;0.23

Question 15

Pay for performance measures in the best interests of shareholders would,logically,exclude long-term achievement and deferred compensation.

Accepted Answer

A) True 
 B)False

Question 16

Use the information below to answer the following question(s).
Brandorf Company has two sources of funds: long term debt with a market and book value of $9 million issued at an interest rate of 10 percent;and,equity capital that has a market value of $6 million (book value of $2 million).The cost of equity capital is 5 percent,while the tax rate is 30 percent.Brandorf Company has profit centres in the following locations with the following data:
  
-What is EVA for Regina?

Accepted Answer

A) $685,200 
B) $342,000 
C) $379,200 
D) $648,000 
E) $218,200 
A) $685,200 
B) $342,000 
C) $379,200 
D) $648,000 
E) $218,200

Question 17

Residual income is income plus an imputed interest charge for the investment.

Accepted Answer

A) True 
 B)False

Question 18

Ethical behaviour on the part of managers,while important for its own sake,is not paramount in importance.

Accepted Answer

A) True 
 B)False

Question 19

Consolidated Gas Supply Corporation uses the investment center concept for the gasoline stations that it manages in the city.Consolidated has a 15% required rate of return on investment in order for a branch station to be viable.Select operating data for three of its stations for the current year are as follows:
   
Required:
a.Compute the return on investment for each station.
b.Which station manager is doing best based only on ROI?
c.Are any of the stations under performing?
d.Should the required rate of return be the same for each station if the business risks are different? Explain.

Accepted Answer

The answer of Consolidated Gas Supply Corporation uses the investment...

Question 20

"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 behaviour. 
D) they are mandated by the external accounting agencies. 
E) they are mandated by taxation agencies. 
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 behaviour. 
D) they are mandated by the external accounting agencies. 
E) they are mandated by taxation agencies.

The cost today of purchasing an asset identical to the one currently held is called a(n)

In establishing performance measures and compensation policy,the issues are interdependent and the decision maker may proceed through a series of decisions several times before selecting the performance measure(s).

Measures which monitor critical performance variables that help managers track progress toward achieving a company's strategic goals are collectively called diagnostic control systems.

The "four levers" of control are operating profit before taxes,return on investment,residual income,and economic value added.

The DuPont method of profitability analysis is

Benchmarks represent 'best practices',and can be derived from either inside or outside the organization.

A company has total assets of $500,000,a required rate of return of 10%,and operating income for the year was $200,000.What is the residual income?

For the period just ended,Trident Ltd.reported profit of $22.6 million and invested capital of $250 million.Assuming an imputed interest rate of 8%,which of the following choices correctly denotes Trident's return on investment (ROI)and residual income respectively?

Pay for performance measures in the best interests of shareholders would,logically,exclude long-term achievement and deferred compensation.

Residual income is income plus an imputed interest charge for the investment.

Ethical behaviour on the part of managers,while important for its own sake,is not paramount in importance.

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

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets,variances,and Management Control: I

Flexible Budgets,variances,and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Analysis of Cost Behaviour

Decision Making and Relevant Information

Pricing Decisions, product Profitability Decisions, and Cost Management

Strategy,balanced Scorecard,and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, rework, and Scrap

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Filters

Exam 22: Multinational Performance Measurement and Compensation

The cost today of purchasing an asset identical to the one currently held is called a(n)

In establishing performance measures and compensation policy,the issues are interdependent and the decision maker may proceed through a series of decisions several times before selecting the performance measure(s).

Measures which monitor critical performance variables that help managers track progress toward achieving a company's strategic goals are collectively called diagnostic control systems.

The "four levers" of control are operating profit before taxes,return on investment,residual income,and economic value added.

The DuPont method of profitability analysis is

Benchmarks represent 'best practices',and can be derived from either inside or outside the organization.

A company has total assets of $500,000,a required rate of return of 10%,and operating income for the year was $200,000.What is the residual income?

For the period just ended,Trident Ltd.reported profit of $22.6 million and invested capital of $250 million.Assuming an imputed interest rate of 8%,which of the following choices correctly denotes Trident's return on investment (ROI)and residual income respectively?

Pay for performance measures in the best interests of shareholders would,logically,exclude long-term achievement and deferred compensation.

Residual income is income plus an imputed interest charge for the investment.

Ethical behaviour on the part of managers,while important for its own sake,is not paramount in importance.

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

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets,variances,and Management Control: I

Flexible Budgets,variances,and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Analysis of Cost Behaviour

Decision Making and Relevant Information

Pricing Decisions, product Profitability Decisions, and Cost Management

Strategy,balanced Scorecard,and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, rework, and Scrap

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Filters