Question 1

Which of the following is a potential disadvantage of decentralization?

Accepted Answer

A) Benchmarking 
B) Duplication of costs 
C) Provides feedback 
D) Provides training

Question 2

Decentralization allows top management to hire workers with expert knowledge for each business unit.

Accepted Answer

A) True 
 B)False

Question 3

When calculating Economic Value Added (EVA),the weighted average cost of capital replaces the target Return on Investment (ROI)as the expected rate of return.

Accepted Answer

A) True 
 B)False

Question 4

The Beverage Division of Natural Foods Corporation had sales of $4,200,000 and operating income of $840,000 last year.The total assets of the Beverage Division were $1,680,000,while current liabilities were $360,000.Natural Foods Corporation's target rate of return is 9%,while its weighted average cost of capital is 7%.The effective tax rate for the company is 40%. 
-What is the Beverage Division's sales margin?

Accepted Answer

A) 250.00% 
B) 50.00% 
C) 20.00% 
D) 8.57%

Question 5

Rickett Company has operating income of $180,000.Its return on investment (ROI)is 30%,while its target r ate of return is 12%.The total assets of Rickett Company would be closest to:

Accepted Answer

A) $ 21,600. 
B) $ 54,000. 
C) $ 600,000. 
D) $1,500,000.

Question 6

Management by exception saves management time by dictating that managers pay attention to only unfavorable variances.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is a potential advantage of decentralization?

Accepted Answer

A) Benchmarking 
B) Promotes goal congruence and coordination 
C) Provides feedback 
D) Provides training

Question 8

The local McDonald's restaurant is likely to be considered to be an investment center.

Accepted Answer

A) True 
 B)False

Question 9

The taxation department for department store chain is likely to be classified as a(n):

Accepted Answer

A) cost center. 
B) investment center. 
C) profit center. 
D) revenue center.

Question 10

The Beverage Division of Natural Foods Corporation had sales of $4,200,000 and operating income of $840,000 last year.The total assets of the Beverage Division were $1,680,000,while current liabilities were $360,000.Natural Foods Corporation's target rate of return is 9%,while its weighted average cost of capital is 7%.The effective tax rate for the company is 40%. 
-What is the Beverage Division's capital turnover?

Accepted Answer

A) 11.7 
B) 5.0 
C) 2.5 
D) 2.0

Question 11

The performance evaluation of cost centers is typically based on which of the following?

Accepted Answer

A) Sales volume variance 
B) ROI 
C) Flexible budget variance 
D) Static budget variance

Question 12

Sarasota Corporation has operating income of $72,000,a sales margin of 12%,and capital turnover of 3.0.The return on investment (ROI)for Sarasota Corporation would be closest to:

Accepted Answer

A) 1%. 
B) 4%. 
C) 36%. 
D) 120%.

Question 13

Selected financial data for the Entertainment Division of Magic Enterprises is as follows: $$\begin{array} { | l | r r | } 
\hline \text { Sales } & \$ & 7,200,000 \
\hline \text { Operating income } & \$ & 1,440,000 \
\hline \text { Total assets } & \$ & 3,000,000 \
\hline \text { Curgent liabilities } & \$ & 800,000 \
\hline \text { Required rate of return } & & 8 \% \
\hline \text { Weighted average cost of capital } & & 6 \% \
\hline
\end{array}$$ 
-What is the Entertainment Division's return on investment?

Accepted Answer

A) 240.00% 
B) 48.00% 
C) 20.00% 
D) 11.11%

Question 14

The percentage of products with on-line help manuals would be an example of measuring which perspective?

Accepted Answer

A) Financial 
B) Customer 
C) Internal business 
D) Learning and growth

Question 15

The difference between actual results and budgeted amounts is called a variance.

Accepted Answer

A) True 
 B)False

Question 16

Kleener Company has a sales margin of 15%,a target rate of return of 12%,and capital turnover of 2.0.The sales in dollars for Kleener Company would be closest to:

Accepted Answer

A) $ 27,000. 
B) $ 90,000. 
C) $ 360,000. 
D) $1,200,000.

Question 17

Customer satisfaction ratings would be an example of the:

Accepted Answer

A) financial perspective. 
B) customer perspective. 
C) internal business perspective. 
D) learning and growth perspective.

Question 18

The following data relates to the Miracle Corporation and its Toy Division. $$\begin{array} { | l | r | } 
\hline \text { Toy Division sales } & \$ 8,000,000 \
\hline \text { Toy Division aperating income } & \$ 480,000 \
\hline \text { Toy Division total assets } & \$ 2,000,000 \
\hline \text { Toy Division current liabilities } & \$ \text { 600,000 } \
\hline \text { Corporate target rate of return } & 14 \% \
\hline \text { Corporate weighted average cost of capital } & 10 \% \
\hline \text { Corporate effective tax rate } & 30 \% \
\hline
\end{array}$$
 
-What is the Toy Division's Economic Value Added (EVA)?

Accepted Answer

A) $140,000 
B) $196,000 
C) $200,000 
D) $336,000

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Financial performance measures are lead indicators.

Accepted Answer

A) True 
 B)False

Exam 11: Performance Evaluation and the Balanced Scorecard

Which of the following is a potential disadvantage of decentralization?

Decentralization allows top management to hire workers with expert knowledge for each business unit.

When calculating Economic Value Added (EVA),the weighted average cost of capital replaces the target Return on Investment (ROI)as the expected rate of return.

Rickett Company has operating income of $180,000.Its return on investment (ROI) is 30%,while its target r ate of return is 12%.The total assets of Rickett Company would be closest to:

Management by exception saves management time by dictating that managers pay attention to only unfavorable variances.

Which of the following is a potential advantage of decentralization?

The local McDonald's restaurant is likely to be considered to be an investment center.

The taxation department for department store chain is likely to be classified as a(n) :

The performance evaluation of cost centers is typically based on which of the following?

Sarasota Corporation has operating income of $72,000,a sales margin of 12%,and capital turnover of 3.0.The return on investment (ROI) for Sarasota Corporation would be closest to:

The percentage of products with on-line help manuals would be an example of measuring which perspective?

The difference between actual results and budgeted amounts is called a variance.

Kleener Company has a sales margin of 15%,a target rate of return of 12%,and capital turnover of 2.0.The sales in dollars for Kleener Company would be closest to:

Customer satisfaction ratings would be an example of the:

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

Financial performance measures are lead indicators.