Question 1

Brodrick 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 $140,000 and net operating income of $25,900 in August.
Required:
What was the Games Division's residual income in August?

Accepted Answer

The answer of Brodrick Corporation uses residual income to evaluate...

Question 2

Minar Inc. reported the following results from last year's operations: $\begin{array}{lrr}
\text { Sales } & \$ 5,700,000 \
\text { Variable expenses } & 3,510,000 \
\text { Contribution margin } & 2,190,000 \
\text { Fixed expenses } & 1,734,000 \
\text { Net operating income } & \$  456,000 \
\text { Average operating assets } & \$ \quad 3,000,000
\end{array}$ At the beginning of this year, the company has a $900,000 investment opportunity with the following characteristics:
$\begin{array}{lc}
\text { Sales } & \$ 1,530,000 \
\text { Contribution margin ratio } & 60 \% \text { of sales } \
\text { Fixed expenses } & \$ 810,900
\end{array}$ If the company pursues the investment opportunity and otherwise performs the same as last year, the combined ROI for the entire company will be closest to:

Accepted Answer

A)  14.4% 
B)  2.7% 
C)  11.7% 
D)  18.8%

Question 3

The Hum Division of the Ho Company reported the following data for last year:  The return on investment (ROI) last year for the Hum Division was:

Accepted Answer

A)  75% 
B)  25% 
C)  35% 
D)  12%

Question 4

A balanced scorecard contains both customer and internal business process performance measures because improvements in internal business process should result in improvements in customer satisfaction.

Accepted Answer

A) True 
 B)False

Question 5

Weafer Inc. reported the following results from last year's operations:  Last year's margin was closest to:

Accepted Answer

A)  10.0% 
B)  73.3% 
C)  5.0% 
D)  31.7%

Question 6

Babak Industries is a division of a major corporation. Last year the division had total sales of $19,560,000, net operating income of $1,877,760, and average operating assets of $6,000,000. The division's turnover is closest to:

Accepted Answer

A)  3.26 
B)  0.31 
C)  2.48 
D)  10.42

Question 7

Financial measures such as ROI and residual income as well as operating measures may be included in a balanced scorecard.

Accepted Answer

A) True 
 B)False

Question 8

The use of return on investment (ROI) as a performance measure may lead managers to reject a project that would be favorable for the company as a whole.

Accepted Answer

A) True 
 B)False

Question 9

Anguiano Inc. reported the following results from last year's operations: $\begin{array}{lr}
\text { Sales } & \$ 10,500,000 \
\text { Variable expenses } & 8,210,000 \
\text { Contribution margin } & 2,290,000 \
\text { Fixed expenses } & 1,555,000 \
\text { Net operating income } & \$ \quad 735,000 \
\end{array}$ The company's average operating assets were $5,000,000.
Last year's return on investment (ROI) was closest to:

Accepted Answer

A)  7.0% 
B)  14.7% 
C)  45.8% 
D)  47.6%

Question 10

A manager would generally like to see a trend indicating a decrease in setup time.

Accepted Answer

A) True 
 B)False

Question 11

Othman Inc. has a $800,000 investment opportunity with the following characteristics: $\begin{array}{lc}
\text { Sales } & \$ 2,240,000 \
\text { Contribution margin ratio } & 50 \% \text { of sales } \
\text { Fixed expenses } & \$ 1,008,000
\end{array}$ The margin for this investment opportunity is closest to:

Accepted Answer

A)  50.0% 
B)  45.0% 
C)  5.0% 
D)  55.0%

Question 12

Wolley Inc. reported the following results from last year's operations:
  At the beginning of this year, the company has a $1,200,000 investment opportunity with the following characteristics:
  The company's minimum required rate of return is 14%.
Required:
1. What was last year's margin? (Round to the nearest 0.1%.)
2. What was last year's turnover? (Round to the nearest 0.01.)
3. What was last year's return on investment (ROI)? (Round to the nearest 0.1%.)
4. What is the margin related to this year's investment opportunity? (Round to the nearest 0.1%.)
5. What is the turnover related to this year's investment opportunity? (Round to the nearest 0.01.)
6. What is the ROI related to this year's investment opportunity? (Round to the nearest 0.1%.)
7. If the company pursues the investment opportunity and otherwise performs the same as last year, what will be the overall margin this year? (Round to the nearest 0.1%.)
8. If the company pursues the investment opportunity and otherwise performs the same as last year, what will be the overall turnover this year? (Round to the nearest 0.01.)
9. If the company pursues the investment opportunity and otherwise performs the same as last year, what will be the overall ROI will this year? (Round to the nearest 0.1%.)
10. If Westerville's chief executive officer earns a bonus only if the ROI for this year exceeds the ROI for last year, would the CEO pursue the investment opportunity? Would the owners of the company want the CEO to pursue the investment opportunity?

Accepted Answer

The answer of Wolley Inc. reported the following results from...

Question 13

Dacker Products is a division of a major corporation. The following data are for the most recent year of operations: $\begin{array}{lr}
\text {Sales }&\$36,480,000\
\text {Net operating income }&\$2,808,960\
\text {Average operating assets }&\$8,000,000\\text { The company's minimum required rate of return }&16\%
\end{array}$
 The division's margin used to compute ROI is closest to:

Accepted Answer

A)  29.6% 
B)  35.1% 
C)  21.9% 
D)  7.7%

Question 14

Which of the following will not result in an increase in return on investment (ROI), assuming other factors remain the same?

Accepted Answer

A)  A reduction in expenses. 
B)  An increase in net operating income. 
C)  An increase in operating assets. 
D)  An increase in sales.

Question 15

Babak Industries is a division of a major corporation. Last year the division had total sales of $19,560,000, net operating income of $1,877,760, and average operating assets of $6,000,000. The division's return on investment (ROI) is closest to:

Accepted Answer

A)  7.3% 
B)  23.8% 
C)  31.3% 
D)  3.0%

Question 16

Schapp Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below: $\begin{array}{lr}
 & \text { Hours } \
\text { Move time } & 2.6 \
\text { Wait time } & 10.4 \
\text { Queue time }& 6.8 \
\text { Process time } & 1.5 \
\text { Inspection time } &0.4
\end{array}$ The throughput time was:

Accepted Answer

A)  11.3 hours 
B)  21.7 hours 
C)  17.2 hours 
D)  4.5 hours

Question 17

Robichau Inc. reported the following results from last year's operations:  At the beginning of this year, the company has a $900,000 investment opportunity with the following characteristics:
 The company's minimum required rate of return is 20%.
Last year's return on investment (ROI) was closest to:

Accepted Answer

A)  47.6% 
B)  18.9% 
C)  9.0% 
D)  45.7%

Question 18

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

Accepted Answer

A)  30.6 hours 
B)  2 hours 
C)  29.4 hours 
D)  11.1 hours

Question 19

Some investment opportunities that should be accepted from the viewpoint of the entire company may be rejected by a manager who is evaluated on the basis of:

Accepted Answer

A)  return on investment. 
B)  residual income. 
C)  contribution margin. 
D)  segment margin.

Question 20

Which of the following performance measures will increase if inventory decreases and all else remains the same? $\begin{array} { l l l } & \text { Return on Investment}& \text {Residual Income }\\text { A) } & \text { Yes } & \text { Yes } \ \text { B) } & \text { No } & \text { Yes } \ \text { C) } & \text { Yes } & \text { No } \ \text { D) } & \text { No } & \text { No } \end{array}$

Accepted Answer

A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D

Exam 11: Performance Measurement in Decentralized Organizations

The Hum Division of the Ho Company reported the following data for last year: The return on investment (ROI) last year for the Hum Division was:

A balanced scorecard contains both customer and internal business process performance measures because improvements in internal business process should result in improvements in customer satisfaction.

Weafer Inc. reported the following results from last year's operations: Last year's margin was closest to:

Babak Industries is a division of a major corporation. Last year the division had total sales of $19,560,000, net operating income of $1,877,760, and average operating assets of $6,000,000. The division's turnover is closest to:

Financial measures such as ROI and residual income as well as operating measures may be included in a balanced scorecard.

The use of return on investment (ROI) as a performance measure may lead managers to reject a project that would be favorable for the company as a whole.

A manager would generally like to see a trend indicating a decrease in setup time.

Which of the following will not result in an increase in return on investment (ROI) , assuming other factors remain the same?

Babak Industries is a division of a major corporation. Last year the division had total sales of $19,560,000, net operating income of $1,877,760, and average operating assets of $6,000,000. The division's return on investment (ROI) is closest to:

Robichau Inc. reported the following results from last year's operations: At the beginning of this year, the company has a $900,000 investment opportunity with the following characteristics: The company's minimum required rate of return is 20%. Last year's return on investment (ROI) was closest to:

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

Some investment opportunities that should be accepted from the viewpoint of the entire company may be rejected by a manager who is evaluated on the basis of: