Exam 7: Performance Management and Evaluation

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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

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Variable costing is utilized to evaluate the performance of

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

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

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

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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 \ ?

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

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

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

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

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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\%

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

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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. 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? -What is the direct labor variance between the actual results and the flexible budget?

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

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

(True/False)
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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

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

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

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

(True/False)
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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. 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? -The flexible budget is based on how many units produced?

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