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: $\begin{array}{lrrr}&\text { Tractor Division }& \text { Tiller Division }& \text {Digger Division }\\ \text { Sales } & \$ 10,000,000 & (\mathrm{a}) & \$ 2,400,000 \\ \text { Net operating income } & \$ 1,000,000 & \$ 1,440,000 & \$ 600,000 \\ \text { Operating assets } & (\mathrm{b}) & (\mathrm{c}) & \$ 2,000,000 \\ \text { Return on investment } & 0.20 & 0.10 & \text { (d) } \\ \text { Return on sales } & (\mathrm{e}) & 0.12 & 0.25 \\ \text { Investment turnover } & \text { (f) } & \text { (g) } & 1.2 \end{array}$ -What is the Tractor Division's return on sales?

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

Match between columns Premises: Change in revenues Cycle time Economic order quantity Manufacturing defects Market share New products On-time delivery Operating income Product reliability Time-to-market

The Answer of Profitability and Customer satisfaction and Innovation and is...

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: $\begin{array}{lrrr}&\text { Tractor Division }& \text { Tiller Division }& \text {Digger Division }\\ \text { Sales } & \$ 10,000,000 & (\mathrm{a}) & \$ 2,400,000 \\ \text { Net operating income } & \$ 1,000,000 & \$ 1,440,000 & \$ 600,000 \\ \text { Operating assets } & (\mathrm{b}) & (\mathrm{c}) & \$ 2,000,000 \\ \text { Return on investment } & 0.20 & 0.10 & \text { (d) } \\ \text { Return on sales } & (\mathrm{e}) & 0.12 & 0.25 \\ \text { Investment turnover } & \text { (f) } & \text { (g) } & 1.2 \end{array}$ -What were the sales for the Tiller Division?

A) $9,600,000 B) $12,000,000 C) $15,000,000 D) $15,500,000 A) $9,600,000 B) $12,000,000 C) $15,000,000 D) $15,500,000

Answer the following questions using the information below: The top management at Amore Corp, 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: $\begin{array}{lrrr}&\text { Alpha Division }&\text { Beta Division }&\text { Gamma Division }\\ \text { Sales } & \$ 5,500,000 & (\mathrm{a}) & \$ 2,500,000 \\ \text { Net operating income } & \$ 3,500,000 & \$ 1,100,000 & \$ 1,200,000 \\ \text { Operating assets } & (\mathrm{b}) & (\mathrm{c}) & \$ 1,600,000 \\ \text { Return on investment } & 0.25 & 0.15 & \text { (d) } \\ \text { Return on sales } & (\mathrm{e}) & 0.10 & 0.5 \\ \text { Investment turnover } & (\mathrm{f}) & \text { (g) } & 1.5 \end{array}$ -What is the Alpha Division's return on sales (e)?

A) 60% B) 65% C) 63.64% D) 53.63% A) 60% B) 65% C) 63.64% D) 53.63%

Bouvous Corporation had the following information for 2015: $\begin{array}{lr} \text { Revenue } & \$ 400,000 \\ \text { Operating expenses } & 350,000 \\ \text { Total assets } & 500,000 \end{array}$ What is the return on investment?

A) 10% B) 20% C) 25% D) 18.2% A) 10% B) 20% C) 25% D) 18.2%

Answer the following questions using the information below: Carriage Incorporated manufactures horse 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 2015: \[\begin{array} { | l | r | r | r | r | } \hline & { \text { ASSETS } } && { \text { INCOME } } \\ \hline & \text { Book value } & \text { Current value } & \text { Book value } & \text { Current value } \\ \hline \text { Wheels } & \$ 485,000 & \$ 550,000 & \$ 120,000 & \$ 140,000 \\ \hline \text { Assembly } & \$ 750,000 & \$ 1,200,000 & \$ 160,000 & \$ 172,500 \\ \hline \end{array}\] 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?

A) 0.21; 0.25 B) 0.25; 0.21 C) 0.14; 0.25 D) 0.25; 0.14 A) 0.21; 0.25 B) 0.25; 0.21 C) 0.14; 0.25 D) 0.25; 0.14

Exam 23: Performance Measurement, compensation, and Multinational Considerations

Capital Investments has three divisions.Each division's required rate of return is 15%.Planned operating results for 2015 are as follows: Division Operating income Investment \ 15,000,000 \ 100,000,000 \ 25,000,000 \ 125,000,000 \ 11,000,000 \ 50,000,000 The company is planning an expansion,which will require each division to increase its investments by $25,000,000 and its income by $4,500,000. Required: a.Compute the current ROI for each division. b.Compute 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)

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Question 81

Current cost return on investment is a better measure of the current economic returns from an investment than historical cost return on investment.

(True/False)

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Question 82

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: Tractor Division Tiller Division Digger Division Sales \ 10,000,000 () \ 2,400,000 Net operating income \ 1,000,000 \ 1,440,000 \ 600,000 Operating assets () () \ 2,000,000 Return on investment 0.20 0.10 (d) Return on sales () 0.12 0.25 Investment turnover (f) (g) 1.2 -What is the Tractor Division's return on sales?

(Multiple Choice)

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Question 83

Assume you are evaluating a manufacturing company. Match the various organizational activities and concepts with the performance measures listed. Some items may have more than one match.

Change in revenues

Profitability

Cycle time

Customer satisfaction

Economic order quantity

Innovation

Correct Answer:

Verified

Change in revenues

Cycle time

Economic order quantity

Manufacturing defects

(Matching)

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Question 84

In an EVA calculation,the appropriate measure of a division's profit would be that division's pre-tax operating income.

(True/False)

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Question 85

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: Tractor Division Tiller Division Digger Division Sales \ 10,000,000 () \ 2,400,000 Net operating income \ 1,000,000 \ 1,440,000 \ 600,000 Operating assets () () \ 2,000,000 Return on investment 0.20 0.10 (d) Return on sales () 0.12 0.25 Investment turnover (f) (g) 1.2 -What were the sales for the Tiller Division?

(Multiple Choice)

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Question 86

________ describes a situation in which an employee prefers to exert less effort than the effort the owner desires because the employee's effort cannot be accurately monitored and enforced.

(Multiple Choice)

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Question 87

Economic value added is equal to ________.

(Multiple Choice)

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Question 88

Answer the following questions using the information below: The top management at Amore Corp, 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 \ 5,500,000 () \ 2,500,000 Net operating income \ 3,500,000 \ 1,100,000 \ 1,200,000 Operating assets () () \ 1,600,000 Return on investment 0.25 0.15 (d) Return on sales () 0.10 0.5 Investment turnover () (g) 1.5 -What is the Alpha Division's return on sales (e)?

(Multiple Choice)

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Question 89

The weighted-average cost of capital (WACC)equals ________.

(Multiple Choice)

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Question 90

Bouvous Corporation had the following information for 2015: Revenue \ 400,000 Operating expenses 350,000 Total assets 500,000 What is the return on investment?

(Multiple Choice)

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Question 91

Stonex Corp,whose tax rate is 40%,has two sources of funds: long-term debt with a market value of $6,000,000 and an interest rate of 8%,and equity capital with a market value of $14,000,000 and a cost of equity of 12%.Stonex has two operating divisions,the Blue division and the Gold division,with the following financial measures for the current year: Total Assets Current Liabilities Operating Income Blue Div. \ 9,500,000 \ 2,500,000 \ 1,155,000 Gold Div. \ 10,000,000 \ 2,400,000 \ 1,200,000 Calculate EVA for the Gold Division.

(Multiple Choice)

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Question 92

Which of the following is true of rewarding managers on the basis of residual income?

(Multiple Choice)

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Question 93

Required rate of return multiplied by the investment is the weighted average cost of the investment.

(True/False)

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Question 94

Vega Corp's corporate income has declined to unacceptable levels.To change the direction of the company,the board of directors hired a new chief executive officer.She is currently considering three alternative ways to reward division managers for performance.They are: 1.Give each manager a competitive salary with no bonus for performance. 2.Give each manager a base salary with the largest portion being a bonus based on performance,ROI being the yardstick. 3.Give each manager a base salary with a bonus based on comparative performance with the other divisions. Required: Evaluate each of the ideas,giving strengths and weaknesses.

(Essay)

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Question 95

What are the factors involved in choosing the timing of the feedback in designing accounting-based performance measures?

(Essay)

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Question 96

To convert the operating income for an overseas branch into US dollars,the historical rate of exchange is used for its conversion into US dollars.

(True/False)

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Question 97

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

(Multiple Choice)

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Question 98

Answer the following questions using the information below: Carriage Incorporated manufactures horse 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 2015: ASSETS INCOME Book value Current value Book value Current value Wheels \ 485,000 \ 550,000 \ 120,000 \ 140,000 Assembly \ 750,000 \ 1,200,000 \ 160,000 \ 172,500 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?

(Multiple Choice)

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Question 99

Which of the following is true of benchmarking two managers against each other if they carry out similar operations?

(Multiple Choice)

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Question 100

Current cost return on investment is a better measure of the current economic returns from an investment than historical cost return on investment.

In an EVA calculation,the appropriate measure of a division's profit would be that division's pre-tax operating income.

________ describes a situation in which an employee prefers to exert less effort than the effort the owner desires because the employee's effort cannot be accurately monitored and enforced.

Economic value added is equal to ________.

The weighted-average cost of capital (WACC)equals ________.

Bouvous Corporation had the following information for 2015: Revenue \ 400,000 Operating expenses 350,000 Total assets 500,000 What is the return on investment?

Which of the following is true of rewarding managers on the basis of residual income?

Required rate of return multiplied by the investment is the weighted average cost of the investment.

What are the factors involved in choosing the timing of the feedback in designing accounting-based performance measures?

To convert the operating income for an overseas branch into US dollars,the historical rate of exchange is used for its conversion into US dollars.

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

Which of the following is true of benchmarking two managers against each other if they carry out similar operations?

The Manager and Management Accounting

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

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

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 and Time

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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