Question 1

One way to achieve greater comparability of historical-cost based ROIs is to restate performance in current dollars.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Museum Corporation uses the investment centre concept for the museums that it manages.Select operating data for three of its museums for the current year are as follows:
   
Required:
a.Compute the return on investment for each division.
b.Which museum manager is doing best based only on ROI?
c.What other accounting performance measures are available when evaluating the managers?

Accepted Answer

a.Montreal = $25,500/$150,000 = 0.170
To

Question 4

If the exchange rate at the end of the a foreign subsidiary's first year was 5 Fidgets to 1 Canadian dollar,and if it was 8 Fidgets to 1 Canadian dollar at the end of the second (current)year,what exchange rate should be used to convert total assets if we want to calculate the company's ROI in Canadian dollars?

Accepted Answer

A) the rate in effect when the ROI is calculated 
B) the rate estimated to be in effect when the ROI is to be reported in the financial statements 
C) the average rate for the year,assuming that the rate changed approximately evenly throughout the year 
D) the rate in effect when the assets were acquired (ie.5 to 1) 
E) it would be double-counting to convert the assets - leave both assets and income in fidgets and the exchange rate for the numerator cancels out the exchange rate for the denominator 
A) the rate in effect when the ROI is calculated 
B) the rate estimated to be in effect when the ROI is to be reported in the financial statements 
C) the average rate for the year,assuming that the rate changed approximately evenly throughout the year 
D) the rate in effect when the assets were acquired (ie.5 to 1) 
E) it would be double-counting to convert the assets - leave both assets and income in fidgets and the exchange rate for the numerator cancels out the exchange rate for the denominator

Question 5

Provide the missing data for the following situations:

Accepted Answer

Red Division:
$200,000 ÷ 0.16
Total asse

Question 6

Bob Cellular Phone 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:
Previous Year ROI = ($2,000,000/$20,000,000)× ($20,000,000/$10,000,000)= 0.20
Current Year 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 the current year since it had made an additional investment in the division which was budgeted for a 23 percent ROI.
Required:
a.Discuss some factors that may have contributed to the decrease in ROI for the current year.
b.Assume total assets employed are 10% less than total assets.What is the effect of using total assets employed when calculating ROI?

Accepted Answer

a.While sales increased by 25 percent,ne

Question 7

Which of the following is the LEAST typical balanced scorecard measure?

Accepted Answer

A) customer satisfaction measures. 
B) direct materials measures. 
C) innovation measures. 
D) time measures. 
E) profitability measures. 
A) customer satisfaction measures. 
B) direct materials measures. 
C) innovation measures. 
D) time measures. 
E) profitability measures.

Question 8

The most popular approach to incorporating the investment base into a performance measure is

Accepted Answer

A) income on return. 
B) opportunity cost. 
C) return on investment. 
D) residual income. 
E) economic value added. 
A) income on return. 
B) opportunity cost. 
C) return on investment. 
D) residual income. 
E) economic value added.

Question 9

An interactive control system is a formal information system that managers use to focus organization attention and learning on key strategic issues.

Accepted Answer

A) True 
 B)False

Question 10

Endicott Inc.has four divisions.Each division produces and sells a variety of industrial products.The company is developing a compensation plan for division managers.Three options are being considered: (a)salary, (b)performance based incentive using RI, (c)mix of salary and a performance based incentive using RI.What factors should be considered in designing this plan?

Accepted Answer

The basic trade-off to consider in desig

Question 11

Economic value added is after-tax operating income minus (required rate of return times total assets).

Accepted Answer

A) True 
 B)False

Question 12

What is the Alpha Division's return on sales?

Accepted Answer

A) 0.25 
B) 0.42 
C) 0.60 
D) 0.75 
E) 0.80 
A) 0.25 
B) 0.42 
C) 0.60 
D) 0.75 
E) 0.80

Question 13

The Auto Division of Fran Corporation has $2.5 million in total assets and $200,000 in liabilities,while the Transportation Division has $5 million in total assets and $3 million in liabilities.What are the imputed costs of the Auto division and of the Transportation division,respectively,if the corporation has a required rate of return of 11%?

Accepted Answer

A) $275,000 and $550,000 
B) $253,000 and $330,000 
C) $297,000 and $880,000 
D) $275,000 and $330,000 
E) $200,000 and $3,000,000 
A) $275,000 and $550,000 
B) $253,000 and $330,000 
C) $297,000 and $880,000 
D) $275,000 and $330,000 
E) $200,000 and $3,000,000

Question 14

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

Accepted Answer

The correct answer will revolve around t

Question 15

The Shamrock Corporation manufactures flower pots in Canada and Ireland.The operations are organized as decentralized divisions.The following information is available for the year just ended:
   
The exchange rate at the time of Shamrock's investment (the end of the previous year)in Ireland was $1.35 Canadian to 1.00 Euro.During the year,the Euro weakened steadily in value and the exchange rate at the end of the current year was 1.24 Canadian = $1.00 Euro.The average exchange rate during the year was 1.28 Canadian = $1.00 Euro.
Required:
a.Calculate the Canadian Division's ROI for last year based on dollars.
b.Calculate the Irish Division's ROI for last year based on Euros.
c.Which of Shamrock's two divisions earned the better ROI? Explain your answer,complete with supporting calculations showing the Irish Division ROI in Canadian dollars.

Accepted Answer

a.Canadian Division's ROI for the year =

Question 16

Paymaster Company provided the following information for the year just ended.
 
What is the return on investment?

Accepted Answer

A) 2.25 
B) 1.57 
C) 1.05 
D) 0.59 
E) 0.55 
A) 2.25 
B) 1.57 
C) 1.05 
D) 0.59 
E) 0.55

One way to achieve greater comparability of historical-cost based ROIs is to restate performance in current dollars.

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

Provide the missing data for the following situations:

Which of the following is the LEAST typical balanced scorecard measure?

The most popular approach to incorporating the investment base into a performance measure is

An interactive control system is a formal information system that managers use to focus organization attention and learning on key strategic issues.

Economic value added is after-tax operating income minus (required rate of return times total assets).

What is the Alpha Division's return on sales?

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

Paymaster Company provided the following information for the year just ended. What is the return on investment?

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

One way to achieve greater comparability of historical-cost based ROIs is to restate performance in current dollars.

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

Provide the missing data for the following situations:

Which of the following is the LEAST typical balanced scorecard measure?

The most popular approach to incorporating the investment base into a performance measure is

An interactive control system is a formal information system that managers use to focus organization attention and learning on key strategic issues.

Economic value added is after-tax operating income minus (required rate of return times total assets).

What is the Alpha Division's return on sales?

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

Paymaster Company provided the following information for the year just ended. What is the return on investment?

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