Exam 22: Performance Management and Evaluation

A performance management and evaluation system allows a company to identify how well it is doing,where it is going,and what improvements will make it more profitable.

Calculate ROI,residual income,and EVA for each of the investment centers listed.(Round to two decimal places.) Investment Center 1 Investment Center 2 Operating income \ 50,000 \ 70,000 Assets invested 125,000 180,000 Income taxes 15,000 21,000 Cost of capital in dollars 13,000 25,000 Desired ROI 56\% 48\%

Identify the following and show the formula for calculating each: a. ROI b. RI c. EVA

Standard costing would most often require which type of performance evaluation?

To succeed,an organization must add value for all of its stakeholders in the long term only.

Use the following performance report for a profit center of the Wet Cat Food Company for the month ended December 31 to answer the question below. What was the actual profit center income?

When developing performance measures,management must consider a number of different issues besides what to measure and how to measure.

The balanced scorecard was developed by

Use the following performance report for a cost center of the Dry Cat Food Division for the month ended December 31 to answer the question below. What is the direct materials variance between the actual results and the flexible budget?

ROI,residual income,and economic value added all represent performance measures that can be utilized to determine investment center performance.

Complete the following calculations for the three investment centers shown (round to two decimal places): 2)For each Investment Center,identify which performance indicator is used.

Why might stock options not be the best way to promote coordination of goals?

Economic value added is synonymous with shareholder wealth created by an investment center.

Why is it important that a manager's evaluation be based only on those revenues and costs that he or she can control?

Compute the residual income for the Hi Ho investment center as shown below. Hi Ho Subsidiary Total sales \ 20,000 Operating income \ 4,300 Beginning assets invested \ 14,000 Ending assets invested \ 16,000 Average assets invested \ ? Desired ROI 25\% Residual income \ ?

The equation for economic value added includes pretax operating income as well as current liabilities.

A performance management and evaluation system is mainly utilized to account for and report on financial performance.

Variable costing is utilized to evaluate the performance of

Using the following information,prepare a traditional income statement and a variable costing income statement: Sales \ 4,000,000 Variable cost of goods sold 1,800,000 Variable selling expenses 900,000 Fixed selling expenses 100,000 Fixed manufacturing costs 600,000

Compute the June 20xx cost of capital (rounded to nearest percent)for an investment center with the following information: Pre-tax operating income for June 20xx \ 17,500,000 Assets at June 30,20 6,200,000 Current liabilities at June 30,20 4,000,000 Long-term liabilities at June 30,20 1,500,000 Income tax expense for June 30,20 5,000,000 EVA 11,940,000