Exam 7: Performance Management and Evaluation

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 20 \ 17,500,000 Assets at June 30,20 200,000 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:x 5,000,000 EVA 11,940,000

Variable costing is utilized to evaluate the performance of

Incentive plans must be developed with input from which of the following groups?

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

Tying compensation incentives to performance targets decreases the likelihood that the goals of responsibility centers, managers, and the entire organization will be well coordinated.

Compute the current liabilities for the Yi Yo investment center as shown below. Yi Yo Subsiliary Total sales \ 18,000 After-tax operating income \ 1,000 Total assets \ 15,000 Current liabilities \ ? Total assets - current liabilities \ 3,500 Cost of capital 15\% Econnmic value addled \ ?

A manager can improve ROI by doing which of the following?

The balanced scorecard links the perspectives of an organization's stakeholders with the organization's

The use of quantitative tools to gauge an organization's performance in relation to a specific goal or an expected outcome is known as

An evaluation of EVA will prove more meaningful if it is compared to

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 clollars 13,000 25,000 Desired ROI 56\% 48\%

Incentive awards are utilized mainly to encourage long-term performance.

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 labor variance between the actual results and the flexible budget?

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

Responsibility accounting is more concerned with performance evaluation than performance management.

As the staff accountant for Investment Center 713, calculate the October 20xx ROI, using the following information: October 20 profit margin 38\% October 20 sales \ 2,000,000 Assets at September 30,20 1,850,000 Assets at October 31,20 1,855,000

What are some items that can affect an investment center's EVA calculation, and how can EVA be improved?

Residual income is the amount of profit left after subtracting expenses of a particular investment center.

Employer-provided health insurance is a common type of incentive compensation.

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. -The flexible budget is based on how many units produced?