Exam 15: Performance Evaluation

What do marketing managers mean by the phrase, "making the numbers?"

The manager of Devon Company's Furniture Division is not satisfied with the level of return on investment that the division achieved this year. What can be done to improve return on investment?

Distinguish between static and flexible budgets. Give an example of how flexible budgets might be used by a business.

When would a variance be labeled as favorable?

The practice of delegating authority and responsibility is referred to as

Based on the information given for a variance, indicate whether the variance is favorable or unfavorable. Item to classify Flexible budget Actual Variance - Favorable or Unfavorable? Contribution margin \ 125,000 \ 120,000

What is a balanced scorecard? How is the balanced scorecard used in performance evaluation?

The Brookings Company had a 12% return on a $50,000 investment in new equipment. The investment resulted in increased sales, and the resultant increase in income amounted to 4% of the increase in sales. Brookshire's turnover was

Poxahatchee Products provided the following selected information about its consumer products division for 2012: Desired ROI 10\% Net Income \ 150,000 Residual Income \ 50,000 Based on this information, the division's investment amount (amount of operating assets) was

Matching. Select the term that best fits the definition or description; enter the number of the term in the column for Your Answer.

Managers should be praised or punished based on variances.

Mindy Norton Company reported the following information for 2012: Sales \ 500,000 Average Operating Assets \ 300,000 Desired ROI 10\% Net Income \ 45,000 Required: Based on this information, calculate the company's residual income for 2012.

Johansson Company developed the following static budget at the beginning of the company's accounting period: Revenue (8,000 units ) \ 16,000 Variable costs Contribution margin \ 12,000 Fixed costs Net income \ 8,000 If the actual volume of sales was 8,200 units, the flexible budget would show variable costs of

Based on the information given for a variance, indicate whether the variance is favorable or unfavorable. Item to classify Flexible budget Actual Variance - Favorable or Unfavorable? Cost of direct materials \ 30,000 \ 31,200

For 2012, an investment center of Lawson Company reported operating income of $420,000 on total operating assets of $2,600,000. The company has established a target ROI of 14% for the investment center. Last year, the investment center's ROI was 11.9%. Required: Calculate the 2012 return on investment for the investment center. Compare its performance for 2012 with both the performance from the previous year and the target ROI.

How does the use of standard costs fit with the philosophy of management by exception?

Bilbo Company evaluates its managers on the basis of return on investment (ROI). Division Three has an ROI of 15% while the company as a whole has an ROI of only 10%. Which of the following performance measures will motivate the managers of Division Three to accept a project earning a 12% return?

Under what circumstances is a sales variance favorable?

Use the following information to answer Question. The Furniture Division of Waverly Company reports the following results for 2012: Revenues \ 400,000 Operating expenses \ 360,000 Operating income \ 40,000 Operating assets \ 500,000 Waverly Company has set a target return on investment (ROI) of 12% for the Furniture Division. Based on the information provided for Furniture, calculate its margin and turnover for 2012, and then use these amounts to calculate ROI.

Summer Company's static budget is based on a planned activity level of 25,000 units. Later, the company's management accountant prepared a budget based on 30,000 units. The company actually produced and sold 29,000 units. In evaluating its performance, management should compare the company's actual revenues and costs to which of the following budgets?