Exam 12: Performance Evaluation and Decentralization

Queen Company has two divisions,the Domestic Division and the International Division.Last year,the Domestic Division earned $360,000 using average operating assets of $1,440,000.Sales for the Domestic Division were $3,600,000.Last year,the International Division earned $560,000 using average operating assets of $2,800,000.Sales for the International Division were $7,000,000. A. For the Domestic Division, the margin is _________, the turnover is________ , and the ROI is______ B. For the International Division, the margin is__________ , the turnover is_______ , and the ROI is_________ C. If these are the only two divisions of Queen Company, what is the ROI for Queen Company?

Along which of the following lines are divisions in a decentralized company NOT created?

Games R Us Company makes children's board games.One popular game requires three hours of processing time,seven hours of waiting time,and five hours of moving time.What is the manufacturing cycle efficiency (MCE)for Games R Us Company?

The selling division would never agree to a transfer price below its full manufacturing cost.

Last night,Rebecca worked on her accounting homework for two and a half hours.During that time,she completed eight problems.What is Rebecca's velocity in problems per hour?

Transfer pricing does not affect divisional profits.

What are the advantages and disadvantages of return on investment (ROI)?

Division A Division B Sales ? 1,250,000 Net operating income \ 25,000 \ 75,000 Average operating assets ? ? Return on investment 20\% 15\% Margin 0.05 ? Tumnover ? ? Target ROI 12\% 10\% -Refer to the Figure.What are the average operating assets for Division B?

The net income reduced by the total annual cost of capital is equal to the economic value added.

Last year,Western Division had a ROI of 15%.The manager of the Western Division is considering an additional investment for the coming year.What step will the manager likely choose to take?

Match each term with the correct statement from below. -A(n)___________ is a responsibility centre in which a manager is responsible only for sales.

The manager of a division is displeased with the ROI of the division.Which of the following steps would increase ROI (holding everything else constant)?

Last night,Rebecca worked on her accounting homework for two and a half hours.During that time,she completed eight problems.What is Rebecca's cycle time for one problem?

Basically,EVA is residual income with the cost of capital equal to the minimum rate of return for the firm.

The Northern Division of Kenmost Company had income of $50,000,average assets of $350,000,and sales of $250,000.The minimum rate of return for Kenmost Company is 12%. A. What is the margin for the Northern Division? B. What is the turnover for the Northern Division? C. What is the ROI for the Northern Division? D. What is the residual income for the Northern Division?

How is margin calculated?

What is the variable set by top management when calculating residual income?

Direct materials \ 0.20 Direct labour 0.70 Variable overhead 0.10 Fixed overhead 0.23 Total \ 1.23 -Refer to the Figure.Assume that Corrugated,Inc.allows division managers to negotiate the transfer price.The Box Division is producing 400,000 boxes.Suppose the Box Division and the Candy Division agree to transfer boxes.What would be the ceiling of the bargaining range,and which division sets it?

Which of the following is an absolute dollar measure rather than a percentage?

Which responsibility centre designation would be used for a production manager?