Question 1

Which of the following statements is/are correct?

Accepted Answer

A)  Invested capital is the assets that an investment centre has available to generate profit. 
B)  When evaluating an investment centre, only the profit is important. 
C)  Return on investment focuses on how effectively each investment centre has used its investment capital. 
D)  Invested capital represents the assets that an investment centre has available to generate profit AND return on investment focuses on how effectively each investment centre has used its investment capital. 
A)  Invested capital is the assets that an investment centre has available to generate profit. 
B)  When evaluating an investment centre, only the profit is important. 
C)  Return on investment focuses on how effectively each investment centre has used its investment capital. 
D)  Invested capital represents the assets that an investment centre has available to generate profit AND return on investment focuses on how effectively each investment centre has used its investment capital.

Question 2

For Echuca Ltd sales are $1 500 000, profit is $90 000, invested capital is $450 000 and the interest rate is 8 per cent. What is the residual income for the year?

Accepted Answer

A)  ($30 000) 
B)  $54 000 
C)  $82 800 
D)  $36 000 
A)  ($30 000) 
B)  $54 000 
C)  $82 800 
D)  $36 000

Question 3

Holt Company Ltd determined residual income for the year of $22 000. The company's cost of capital was 12 per cent, the investment turnover was 2.0, and capital invested was $400 000. What was Holt Company's profit during the year?

Accepted Answer

A)  $26 000 
B)  $48 000 
C)  $74 000 
D)  $70 000 
A)  $26 000 
B)  $48 000 
C)  $74 000 
D)  $70 000

Question 4

For which of the following reasons are group pay systems often preferred to individual schemes?
i. They encourage teamwork.
ii. They reduce dysfunctional competition between employees.
iii. They promote equity between employees.

Accepted Answer

A)  i and ii 
B)  ii and iii 
C)  i and iii 
D)  All of the given answers 
A)  i and ii 
B)  ii and iii 
C)  i and iii 
D)  All of the given answers

Question 5

The following information relates to Black's Mount Ltd:  
What is its economic value added?

Accepted Answer

A)  $120 000 
B)  $180 000 
C)  $240 000 
D)  $292 000 
A)  $120 000 
B)  $180 000 
C)  $240 000 
D)  $292 000

Question 6

Expectancy theory relates employee motivation to valence, expectancy and instrumentality.

Accepted Answer

A) True 
 B)False

Question 7

Calculate the asset turnover from the following data:

Accepted Answer

A)  0.07 
B)  0.67 
C)  0.53 
D)  0.05 
A)  0.07 
B)  0.67 
C)  0.53 
D)  0.05

Question 8

White Hills Ltd reported a return on investment of 12 per cent, a capital turnover of 5 and income of $180 000. What was the company's invested capital?

Accepted Answer

A)  $300 000 
B)  $900 000 
C)  $1 500 000 
D)  $7 500 000 
A)  $300 000 
B)  $900 000 
C)  $1 500 000 
D)  $7 500 000

Question 9

For Mildura Ltd, if the sales are $1 500 000, the invested capital $450 000 and the profit $90 000, what is the asset turnover for the year?

Accepted Answer

A)  20% 
B)  5% 
C)  30% 
D)  333% 
A)  20% 
B)  5% 
C)  30% 
D)  333%

Question 10

The asset turnover of an organisation can be calculated as:

Accepted Answer

A)  the amount of sales revenue divided by total invested capital. 
B)  total invested capital divided by sales revenue. 
C)  total sales revenue divided by profit. 
D)  profit divided by sales margin. 
A)  the amount of sales revenue divided by total invested capital. 
B)  total invested capital divided by sales revenue. 
C)  total sales revenue divided by profit. 
D)  profit divided by sales margin.

Question 11

When employees have the opportunity in the larger scheme of things, to pursue a task that they consider worthy, this has been identified (Robbins et al., 2004; Thomas, 2000) as:

Accepted Answer

A)  competence. 
B)  progress. 
C)  meaningfulness. 
D)  choice. 
A)  competence. 
B)  progress. 
C)  meaningfulness. 
D)  choice.

Question 12

All the following actions will increase return on investment except:

Accepted Answer

A)  an increase in sales revenues. 
B)  a decrease in operating expenses. 
C)  a decrease in the company's invested capital. 
D)  a decrease in the number of units sold. 
A)  an increase in sales revenues. 
B)  a decrease in operating expenses. 
C)  a decrease in the company's invested capital. 
D)  a decrease in the number of units sold.

Question 13

Jasmine Dimm is a call centre manager for Tostra, a mobile phone company. Call centre operators at her call centre are responsible for making sales calls to customers to promote Tostra's new products. Jasmine sets two performance targets for her operators: sales and average call duration. Every 6 months, any call centre operator who can achieve both targets goes into a random draw with a one-in-ten chance of winning a $50 supermarket giftcard.
All her call centre operators agree that these two targets are clearly specified, objectively measured and achievable with hard work. However, the call centre operators are still unhappy with the new incentive system. According to the expectancy theory, this is because:

Accepted Answer

A)  the incentive system lacks valence and instrumentality. 
B)  the incentive system lacks expectancy. 
C)  the incentive system lacks expectancy and valence. 
D)  the incentive system lacks expectancy and instrumentality. 
A)  the incentive system lacks valence and instrumentality. 
B)  the incentive system lacks expectancy. 
C)  the incentive system lacks expectancy and valence. 
D)  the incentive system lacks expectancy and instrumentality.

Question 14

The income calculation for a divisional manager's return on investment should be based on:

Accepted Answer

A)  divisional contribution margin. 
B)  profit margin controllable by the divisional manager. 
C)  profit margin traceable to the division. 
D)  division income before interest and income tax. 
A)  divisional contribution margin. 
B)  profit margin controllable by the divisional manager. 
C)  profit margin traceable to the division. 
D)  division income before interest and income tax.

Question 15

Which of the following strategies may increase economic value added?

Accepted Answer

A)  Increase profit as a percentage of capital employed. 
B)  Borrow additional funds and invest in assets that earn more than the weighted average cost of capital. 
C)  Sell off assets that earn more than the weighted average cost of capital. 
D)  Increase profit as a percentage of capital employed AND borrow additional funds and invest in assets that earn more than the weighted average cost of capital. 
A)  Increase profit as a percentage of capital employed. 
B)  Borrow additional funds and invest in assets that earn more than the weighted average cost of capital. 
C)  Sell off assets that earn more than the weighted average cost of capital. 
D)  Increase profit as a percentage of capital employed AND borrow additional funds and invest in assets that earn more than the weighted average cost of capital.

Question 16

Fine Furnishings Pty Ltd earned residual income of $40 000 during the year. The net profit was $160 000 during the year and the cost of capital was 12 per cent. What was the return on investment for the year?

Accepted Answer

A)  9% 
B)  12% 
C)  16% 
D)  Insufficient information to determine 
A)  9% 
B)  12% 
C)  16% 
D)  Insufficient information to determine

Question 17

Which of the following are, according to Herzberg, motivating factors?

Accepted Answer

A)  Recognition 
B)  Working conditions 
C)  Relationships with colleagues 
D)  Recognition AND working conditions 
A)  Recognition 
B)  Working conditions 
C)  Relationships with colleagues 
D)  Recognition AND working conditions

Question 18

One of the main advantages of return on investment is that it can be used with some responsibility centres to evaluate performance.

Accepted Answer

A) True 
 B)False

Question 19

Under a deferred payment incentive schemes managers are likely to:

Accepted Answer

A)  maximise short-term profit. 
B)  focus on short-term plans. 
C)  maximise medium and long-term profits. 
D)  strive for short-term performance. 
A)  maximise short-term profit. 
B)  focus on short-term plans. 
C)  maximise medium and long-term profits. 
D)  strive for short-term performance.

Question 20

Given that return on investment measures performance over time, the invested capital would most appropriately be calculated by using:

Accepted Answer

A)  beginning of year assets. 
B)  average assets. 
C)  total assets. 
D)  current assets. 
A)  beginning of year assets. 
B)  average assets. 
C)  total assets. 
D)  current assets.

Which of the following statements is/are correct?

For Echuca Ltd sales are $1 500 000, profit is $90 000, invested capital is $450 000 and the interest rate is 8 per cent. What is the residual income for the year?

Holt Company Ltd determined residual income for the year of $22 000. The company's cost of capital was 12 per cent, the investment turnover was 2.0, and capital invested was $400 000. What was Holt Company's profit during the year?

For which of the following reasons are group pay systems often preferred to individual schemes? i. They encourage teamwork. ii. They reduce dysfunctional competition between employees. iii. They promote equity between employees.

The following information relates to Black's Mount Ltd: What is its economic value added?

Expectancy theory relates employee motivation to valence, expectancy and instrumentality.

Calculate the asset turnover from the following data:

White Hills Ltd reported a return on investment of 12 per cent, a capital turnover of 5 and income of $180 000. What was the company's invested capital?

For Mildura Ltd, if the sales are $1 500 000, the invested capital $450 000 and the profit $90 000, what is the asset turnover for the year?

The asset turnover of an organisation can be calculated as:

When employees have the opportunity in the larger scheme of things, to pursue a task that they consider worthy, this has been identified (Robbins et al., 2004; Thomas, 2000) as:

All the following actions will increase return on investment except:

The income calculation for a divisional manager's return on investment should be based on:

Which of the following strategies may increase economic value added?

Fine Furnishings Pty Ltd earned residual income of $40 000 during the year. The net profit was $160 000 during the year and the cost of capital was 12 per cent. What was the return on investment for the year?

Which of the following are, according to Herzberg, motivating factors?

One of the main advantages of return on investment is that it can be used with some responsibility centres to evaluate performance.

Under a deferred payment incentive schemes managers are likely to:

Given that return on investment measures performance over time, the invested capital would most appropriately be calculated by using:

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Product Costing Systems

Process Costing and Operation Costing

Service Costing

A Closer Look at Overhead Costs

Activity-Based Costing

Budgeting Systems

Standard Costs for Control: Direct Material and Direct Labour

Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Managing and Reporting Performance

Strategic Performance Measurement Systems

Managing Suppliers and Customers

Managing Costs and Quality

Sustainability and Management Accounting

Cost Volume Profit Analysis

Information for Decisions: Relevant Costs and Benefits

Pricing and Product Mix Decisions

Information for Capital Expenditure Decisions

Filters

Exam 13: Financial Performance Measures and Incentive Schemes

Which of the following statements is/are correct?

For Echuca Ltd sales are $1 500 000, profit is $90 000, invested capital is $450 000 and the interest rate is 8 per cent. What is the residual income for the year?

Holt Company Ltd determined residual income for the year of $22 000. The company's cost of capital was 12 per cent, the investment turnover was 2.0, and capital invested was $400 000. What was Holt Company's profit during the year?

For which of the following reasons are group pay systems often preferred to individual schemes? i. They encourage teamwork. ii. They reduce dysfunctional competition between employees. iii. They promote equity between employees.

The following information relates to Black's Mount Ltd: What is its economic value added?

Expectancy theory relates employee motivation to valence, expectancy and instrumentality.

Calculate the asset turnover from the following data:

White Hills Ltd reported a return on investment of 12 per cent, a capital turnover of 5 and income of $180 000. What was the company's invested capital?

For Mildura Ltd, if the sales are $1 500 000, the invested capital $450 000 and the profit $90 000, what is the asset turnover for the year?

The asset turnover of an organisation can be calculated as:

When employees have the opportunity in the larger scheme of things, to pursue a task that they consider worthy, this has been identified (Robbins et al., 2004; Thomas, 2000) as:

All the following actions will increase return on investment except:

The income calculation for a divisional manager's return on investment should be based on:

Which of the following strategies may increase economic value added?

Fine Furnishings Pty Ltd earned residual income of $40 000 during the year. The net profit was $160 000 during the year and the cost of capital was 12 per cent. What was the return on investment for the year?

Which of the following are, according to Herzberg, motivating factors?

One of the main advantages of return on investment is that it can be used with some responsibility centres to evaluate performance.

Under a deferred payment incentive schemes managers are likely to:

Given that return on investment measures performance over time, the invested capital would most appropriately be calculated by using:

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Product Costing Systems

Process Costing and Operation Costing

Service Costing

A Closer Look at Overhead Costs

Activity-Based Costing

Budgeting Systems

Standard Costs for Control: Direct Material and Direct Labour

Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Managing and Reporting Performance

Strategic Performance Measurement Systems

Managing Suppliers and Customers

Managing Costs and Quality

Sustainability and Management Accounting

Cost Volume Profit Analysis

Information for Decisions: Relevant Costs and Benefits

Pricing and Product Mix Decisions

Information for Capital Expenditure Decisions

Filters