Question 1

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

Accepted Answer

A) It would lead to better cooperation among the managers. 
B) It would reduce the managers' incentives to help one another. 
C) It would enhance the accomplishment of organization goals. 
D) It would help reduce costs common to both the departments. 
A) It would lead to better cooperation among the managers. 
B) It would reduce the managers' incentives to help one another. 
C) It would enhance the accomplishment of organization goals. 
D) It would help reduce costs common to both the departments.

Question 2

Times Corporation,whose tax rate is 30%,has two sources of funds: long-term debt with a market value of $6,500,000 and an interest rate of 7%,and equity capital with a market value of $18,000,000 and a cost of equity of 11%.Times Corporation's after-tax cost of debt is ________.

Accepted Answer

A) 9)38% 
B) 4)90% 
C) 7)00% 
D) 11.00% 
A) 9)38% 
B) 4)90% 
C) 7)00% 
D) 11.00%

Question 3

An important consideration in designing compensation arrangements is the tradeoff between creating incentives and imposing risks.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

"Cooking the books" means reporting of understated assets and overstated liabilities.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

The Cybertronics Corporation reported the following information for its Cyclotron Division:
$\begin{array}{ll}
\text { Revenues } & \$ 2,300,000 \
\text { Operating costs } & 1,700,000 \
\text { Operating assets } & 1,100,000
\end{array}$
Income is defined as operating income.
What is the Cyclotron Division's return on investment?

Accepted Answer

A) 35.3% 
B) 70.6% 
C) 27.3% 
D) 54.5% 
A) 35.3% 
B) 70.6% 
C) 27.3% 
D) 54.5%

Question 8

Make a list of steps of designing an accounting based performance measure.Give an example of decisions taken under each step.

Accepted Answer

1.Choose performance measures that align

Question 9

Historical-cost-based accounting measures are usually inadequate for evaluating economic returns on new investments and,in some cases,create disincentives for expansion.

Accepted Answer

A) True 
 B)False

Question 10

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:
 
What is the Tractor Division's investment turnover?

Accepted Answer

A) 5)0 
B) 8)3 
C) 1)7 
D) 1)0 
A) 5)0 
B) 8)3 
C) 1)7 
D) 1)0

Question 11

Which of the following is true of an executive compensation plan?

Accepted Answer

A) The compensation paid to the executives should be linked only to the financial performance of the company. 
B) Most compensation plans are two parts: salary and health plan 
C) It does not help balancing risk with short-run and long-run incentives. 
D) It includes salary,annual incentive compensation,and benefits such as medical benefits,pension plans,and life insurance. 
A) The compensation paid to the executives should be linked only to the financial performance of the company. 
B) Most compensation plans are two parts: salary and health plan 
C) It does not help balancing risk with short-run and long-run incentives. 
D) It includes salary,annual incentive compensation,and benefits such as medical benefits,pension plans,and life insurance.

Question 12

To evaluate overall performance,return on investment and residual income measures are more appropriate than return on sales.

Accepted Answer

A) True 
 B)False

Question 13

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:
 
What is the Tractor Division's return on sales?

Accepted Answer

A) 0)02 
B) 12.50 
C) 0)22 
D) 0)20 
A) 0)02 
B) 12.50 
C) 0)22 
D) 0)20

Question 14

Home Decor Inc. ,manufactures home cleaning products.The company has two divisions,Bleach and Cleanser.Because of different accounting methods and inflation rates,the company is considering multiple evaluation measures.The following information is provided for 2018:
 
The company is currently using a 15% required rate of return.
What are Bleach's and Cleanser's return on investment based on book values,respectively?

Accepted Answer

A) 29%;40 % 
B) 58%;36 % 
C) 36%;58% 
D) 40%;29% 
A) 29%;40 % 
B) 58%;36 % 
C) 36%;58% 
D) 40%;29%

Question 15

Megatron Corp.earned net income of 16,000 Euros in its overseas branch at France.Its headquarters is located in the U.S.The rate of conversion during set up was $1.309 / Euro.What is the value of its income in its home currency if the rate is $1.508 / Euro at the end of a financial year and the average rate being $1.410 / Euro?

Accepted Answer

A) $12,223 
B) $22,560 
C) $24,128 
D) $20,944 
A) $12,223 
B) $22,560 
C) $24,128 
D) $20,944

Question 16

Economic value added is equal to ________.

Accepted Answer

A) After-tax operating income - [Weighted-average cost of capital + (Total assets - Current liabilities)] 
B) Pre-tax operating income - [Weighted-average cost of capital + (Total assets - Current liabilities)] 
C) After-tax operating income - [Weighted-average cost of capital × (Total assets - Current liabilities)] 
D) Pre-tax operating income - [Weighted-average cost of capital × (Total assets - Current liabilities)] 
A) After-tax operating income - [Weighted-average cost of capital + (Total assets - Current liabilities)] 
B) Pre-tax operating income - [Weighted-average cost of capital + (Total assets - Current liabilities)] 
C) After-tax operating income - [Weighted-average cost of capital × (Total assets - Current liabilities)] 
D) Pre-tax operating income - [Weighted-average cost of capital × (Total assets - Current liabilities)]

Question 17

Which of the following is the required rate of return used in the economic value added (EVA)calculation?

Accepted Answer

A) The ROI of the division or company being evaluated 
B) After-tax weighted-average cost of capital 
C) The residual income/total assets 
D) The after-tax operating income/(Total assets - current liabilities) 
A) The ROI of the division or company being evaluated 
B) After-tax weighted-average cost of capital 
C) The residual income/total assets 
D) The after-tax operating income/(Total assets - current liabilities)

Question 18

Waldorf Company has two sources of funds: long-term debt with a market and book value of $5,200,000 issued at an interest rate of 13%,and equity capital that has a market value of $4,200,000 (book value of $2,400,000).Waldorf Company has profit centers in the following locations with the following operating incomes,total assets,and current liabilities.The cost of equity capital is 13%,while the tax rate is 35%.
 
What is the EVA® for St.Louis? (Round intermediary calculations to four decimal places. )

Accepted Answer

A) $65,739 
B) $51,048 
C) $312,000 
D) $260,952 
A) $65,739 
B) $51,048 
C) $312,000 
D) $260,952

Question 19

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:
 
What is the value of the operating assets belonging to the Tiller Division?

Accepted Answer

A) $10,000,000 
B) $15,384,615 
C) $9,523,810 
D) $260,000 
A) $10,000,000 
B) $15,384,615 
C) $9,523,810 
D) $260,000

Question 20

Moto Corp allows its divisions to operate as autonomous units.The operating data for 2015 follow:
   
Required:
a.Compute the investment turnover for each division.
b.Compute the return on sales for each division.
c.Compute the return on investment for each division.
d.Which division manager is doing best? Why?
e.What other factors should be included when evaluating the managers?
For parts (b)and (c)income is defined as operating income.

Accepted Answer

a.Investment turnover:
 @#IMG-DLM&_TB5540_00_TB554

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

Times Corporation,whose tax rate is 30%,has two sources of funds: long-term debt with a market value of $6,500,000 and an interest rate of 7%,and equity capital with a market value of $18,000,000 and a cost of equity of 11%.Times Corporation's after-tax cost of debt is ________.

An important consideration in designing compensation arrangements is the tradeoff between creating incentives and imposing risks.

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

"Cooking the books" means reporting of understated assets and overstated liabilities.

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

The Cybertronics Corporation reported the following information for its Cyclotron Division: Revenues \ 2,300,000 Operating costs 1,700,000 Operating assets 1,100,000 Income is defined as operating income. What is the Cyclotron Division's return on investment?

Make a list of steps of designing an accounting based performance measure.Give an example of decisions taken under each step.

Historical-cost-based accounting measures are usually inadequate for evaluating economic returns on new investments and,in some cases,create disincentives for expansion.

Which of the following is true of an executive compensation plan?

To evaluate overall performance,return on investment and residual income measures are more appropriate than return on sales.

Economic value added is equal to ________.

Which of the following is the required rate of return used in the economic value added (EVA)calculation?

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

Filters

Exam 23: Performance Measurement, compensation, and Multinational Considerations

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

Times Corporation,whose tax rate is 30%,has two sources of funds: long-term debt with a market value of $6,500,000 and an interest rate of 7%,and equity capital with a market value of $18,000,000 and a cost of equity of 11%.Times Corporation's after-tax cost of debt is ________.

An important consideration in designing compensation arrangements is the tradeoff between creating incentives and imposing risks.

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

"Cooking the books" means reporting of understated assets and overstated liabilities.

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

The Cybertronics Corporation reported the following information for its Cyclotron Division: Revenues \ 2,300,000 Operating costs 1,700,000 Operating assets 1,100,000 Income is defined as operating income. What is the Cyclotron Division's return on investment?

Make a list of steps of designing an accounting based performance measure.Give an example of decisions taken under each step.

Historical-cost-based accounting measures are usually inadequate for evaluating economic returns on new investments and,in some cases,create disincentives for expansion.

Which of the following is true of an executive compensation plan?

To evaluate overall performance,return on investment and residual income measures are more appropriate than return on sales.

Economic value added is equal to ________.

Which of the following is the required rate of return used in the economic value added (EVA)calculation?

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

Filters