Exam 10: Performance Measurement in Decentralized Organizations

Residual income is the net operating income that an investment center earns above the minimum required return on the investment in operating assets.

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 average operating assets in Year 2 were:

In August,the Universal Solutions Division of Jugan Corporation had average operating assets of $670,000 and net operating income of $77,500.The company uses residual income,with a minimum required rate of return of 12%,to evaluate the performance of its divisions.What was the Universal Solutions Division's residual income in August?

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 net operating income in Year 1 was:

Waltner Corporation's management reports that its average delivery cycle time is 20.0 days,its average throughput time is 7.5 days,its manufacturing cycle efficiency (MCE)is 0.32,its average move time is 0.2 day,and its average queue time is 4.0 days. Required: a.What is the wait time? b.What is the process time? c.What is the inspection time?

Dickonson Products is a division of a major corporation. The following data are for the last year of operations: -The division's turnover is closest to:

Galanis Corporation keeps careful track of the time required to fill orders.Data concerning a particular order appear below: The throughput time was:

Sales and average operating assets for Company P and Company Q are given below: What is the margin that each company will have to earn in order to generate a return on investment of 20%?

During the most recent month at Coggan Corporation,queue time was 5.3 days,inspection time was 0.5 day,process time was 1.9 days,wait time was 4.5 days,and move time was 0.5 day. 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.

The following data are available for the South Division of Redride Products, Inc. and the single product it makes: -How many units must South sell each year to have an ROI of 16%?

Residual income is superior to return on investment as a means of measuring performance because it encourages managers to make investment decisions that are more consistent with the interests of the company as a whole.

The West Division of Shekarchi Corporation had average operating assets of $620,000 and net operating income of $80,100 in March. The minimum required rate of return for performance evaluation purposes is 14%. -What was the West Division's minimum required return in March?

The Reed Division reports the following operating data for the past two years: The return on investment at Reed was exactly the same in Year 1 and Year 2. -The margin in Year 2 was:

Soderquist Corporation uses residual income to evaluate the performance of its divisions.The company's minimum required rate of return is 11%.In April,the Commercial Products Division had average operating assets of $100,000 and net operating income of $9,400.What was the Commercial Products Division's residual income in April?

The division's margin is closest to:

Saffer Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below: -The delivery cycle time was:

Madrazo Corporation uses residual income to evaluate the performance of its divisions.The minimum required rate of return for performance evaluation purposes is 19%.The Games Division had average operating assets of $410,000 and net operating income of $86,000 in June. Required: What was the Games Division's residual income in June?

The Consumer Products Division of Weiter Corporation had average operating assets of $570,000 and net operating income of $65,100 in March. The minimum required rate of return for performance evaluation purposes is 12%. -What was the Consumer Products Division's residual income in March?

The West Division of Shekarchi Corporation had average operating assets of $620,000 and net operating income of $80,100 in March. The minimum required rate of return for performance evaluation purposes is 14%. -What was the West Division's residual income in March?

Beall Industries is a division of a major corporation. Last year the division had total sales of $20,160,000, net operating income of $1,592,640, and average operating assets of $8,000,000. -The division's return on investment (ROI)is closest to: