Exam 10: Performance Measurement in Decentralized Organizations

Chace Products is a division of a major corporation. Last year the division had total sales of $21,300,000, net operating income of $575,100, and average operating assets of $5,000,000. The company's minimum required rate of return is 12%. -The division's residual income is closest to:

In determining the dollar amount to use for operating assets in the return on investment (ROI)calculation,companies will generally use either net book value or gross cost of the assets.Which of the following is an argument for the use of net book value rather than gross cost?

Consider a company that has only variable costs.All other things the same,an increase in unit sales will result in no change in the return on investment.

Jaster Corporation's management keeps track of the time it takes to process orders.During the most recent month,the following average times were recorded per order: Required: a.Compute the throughput time. b.Compute the manufacturing cycle efficiency (MCE). c.What percentage of the production time is spent in non-value-added activities? d.Compute the delivery cycle time.

Turnover is computed by dividing average operating assets into:

Operating data from Tindall Company for last year follows: -The residual income was:

Hart Manufacturing operates an automated steel fabrication process. For one operation, Hart has found that 45% of the total throughput (manufacturing cycle) time is spent on non-value-added activities. Delivery cycle time is 12 hours, waiting time during the production process is 3 hours, queue time prior to starting the production process is 2 hours, and inspection time is 1.2 hours. -What is the throughput (manufacturing cycle)time for the operation?

Estes Company has assembled the following data for its divisions for the past year: -Division B's average operating assets is:

Residual income should not be used to evaluate a cost center.

Operating data from Tindall Company for last year follows: -The average operating assets amounted to:

All other things the same,which of the following would increase residual income?

The Casket Division of Rosencranz Corporation had average operating assets of $150,000 and net operating income of $27,800 in March.The company uses residual income to evaluate the performance of its divisions,with a minimum required rate of return of 17%. Required: What was the Casket Division's residual income in March?

Estes Company has assembled the following data for its divisions for the past year: -Division A's sales are:

A balanced scorecard should contain every performance measure that can be expected to influence a company's profits.

Residual income equals average operating assets multiplied by the difference between the return on investment and the minimum required rate of return.

Operating data from Tindall Company for last year follows: -The margin used in ROI calculations was closest to:

Hoster Corporation keeps careful track of the time required to fill orders.The times recorded for a particular order appear below: The throughput time was:

Division B had an ROI last year of 15%.The division's minimum required rate of return is 10%.If the division's average operating assets last year were $450,000,then the division's residual income for last year was:

The Baily Division recorded operating data as follows for the past two years: Baily Division's turnover was exactly the same in both Year 1 and Year 2. -The margin in Year 2 was:

Chace Products is a division of a major corporation. Last year the division had total sales of $21,300,000, net operating income of $575,100, and average operating assets of $5,000,000. The company's minimum required rate of return is 12%. -The division's return on investment (ROI)is closest to: