Question 1

What will happen to return on investment (ROI) if selling and administrative expenses decrease while everything else remains the same?

Accepted Answer

A)  ROI will increase. 
B)  ROI will decrease. 
C)  ROI will not be affected. 
D)  We cannot determine the effect from the information provided.

Question 2

Residual income is the difference between revenues and expenses.

Accepted Answer

A) True 
 B)False

Question 3

The following information for Hamton Inns was available for the past year:
  
Management has a 25% target rate of return. Hamton's weighted average cost of capital is 17% and its effective tax rate is 32%.
Calculate the EVA.

Accepted Answer

The answer of The following information for Hamton Inns was...

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Use the information below to answer the following question(s):
Assume the Cell Phone Division of the First Electronics Corporation had the following results last year (in thousands). Management's target rate of return is 10% and the weighted average cost of capital is 7%. Its effective tax rate is 30%.
 
-What is the First Electronics Corporation cell phone division's profit margin?

Accepted Answer

A)  200.00% 
B)  15.00% 
C)  25.00% 
D)  30.00%

Question 6

With ________, managers look at the size of the variances between actual results and budgeted amounts to determine which variances a manager should investigate.

Accepted Answer

A)  management by variance 
B)  management by budget 
C)  management by decision 
D)  management by exception

Question 7

Use the information below to answer the following question(s):
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 Economic Value Added (EVA)?

Accepted Answer

A)  $688,800 
B)  $504,000 
C)  $411,600 
D)  $92,400

Question 8

Use the information below to answer the following question(s):
The following data relates to the Miracle Corporation and its Toy Division.
 
-What is the Toy Division's profit margin?

Accepted Answer

A)  6% 
B)  24% 
C)  30% 
D)  400%

Question 9

The duties of an investment centre manager are similar to those of a CFO.

Accepted Answer

A) True 
 B)False

Question 10

The following information for Night Inns was available for the past year:
  
Management has a 25% target rate of return. Night's weighted average cost of capital is 17% and its effective tax rate is 32%.
Calculate the EVA.

Accepted Answer

The answer of The following information for Night Inns was...

Question 11

The financial results for one of the subunits of Factory Six Racing is presented in the partially completed performance evaluation report below.
  
* Flexible budget variance/Flexible budget
Required:
1. Complete the performance report rounding to three decimal places.
2. Based on the data presented, what type of responsibility centre is this subunit?
3. Which items should be investigated if part of management's decision criteria is to investigate all variances equal to or exceeding $5,000 and exceeding 10% ( both criteria must be met)?

Accepted Answer

The answer of The financial results for one of the...

Question 12

Gretzel had the following financial results for last month. Which type of responsibility centre do these financial results reflect?

Accepted Answer

A)  Revenue centre 
B)  Profit centre 
C)  Investment centre 
D)  Cost centre

Question 13

Which of the following responsibility centres use a performance report that compares only actual revenues and budgeted revenues?

Accepted Answer

A)  Cost centre 
B)  Revenue centre 
C)  Investment centre 
D)  Profit centre

Question 14

The difference between amounts in the static budget and the flexible budget for a revenue centre is caused by which of the following?

Accepted Answer

A)  The cost of sales 
B)  The selling price per unit 
C)  The number of units sold differs from planned sales levels 
D)  Both the selling price and the number of units sold

Question 15

How can a manager increase return on investment (ROI)?

Accepted Answer

A)  Decrease operating expenses 
B)  Increase operating assets 
C)  Decrease sales 
D)  Increase operating expenses

Question 16

New product development time would be an example of the

Accepted Answer

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

Question 17

The central reservation office at American Airlines is most likely treated as a(n)

Accepted Answer

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

Question 18

Powell Enterprises has operating income of $72,000. Its return on investment (ROI) is 36%, while its target rate of return is 10%. The total assets of Powell Enterprises would be closest to

Accepted Answer

A)  $7,200. 
B)  $25,920. 
C)  $200,000. 
D)  $720,000.

Question 19

Pillsbury produces cookies, pizza, bread, and other food items. Pillsbury was acquired by General Mills in 2001 for $10.4 billion. Pillsbury is likely to be classified as a(n)

Accepted Answer

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

Question 20

Use the information below to answer the following question(s):
The following data relates to the Miracle Corporation and its Toy Division.
 
-What is the Toy Division's Return on Investment (ROI)?

Accepted Answer

A)  6% 
B)  24% 
C)  30% 
D)  400%

Exam 11: Performance Evaluation and the Balanced Scorecard

What will happen to return on investment (ROI) if selling and administrative expenses decrease while everything else remains the same?

Residual income is the difference between revenues and expenses.

The following information for Hamton Inns was available for the past year: Management has a 25% target rate of return. Hamton's weighted average cost of capital is 17% and its effective tax rate is 32%. Calculate the EVA.

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

With ________, managers look at the size of the variances between actual results and budgeted amounts to determine which variances a manager should investigate.

Use the information below to answer the following question(s) : The following data relates to the Miracle Corporation and its Toy Division. -What is the Toy Division's profit margin?

The duties of an investment centre manager are similar to those of a CFO.

The following information for Night Inns was available for the past year: Management has a 25% target rate of return. Night's weighted average cost of capital is 17% and its effective tax rate is 32%. Calculate the EVA.

Gretzel had the following financial results for last month. Which type of responsibility centre do these financial results reflect?

Which of the following responsibility centres use a performance report that compares only actual revenues and budgeted revenues?

The difference between amounts in the static budget and the flexible budget for a revenue centre is caused by which of the following?

How can a manager increase return on investment (ROI) ?

New product development time would be an example of the

The central reservation office at American Airlines is most likely treated as a(n)

Powell Enterprises has operating income of $72,000. Its return on investment (ROI) is 36%, while its target rate of return is 10%. The total assets of Powell Enterprises would be closest to

Pillsbury produces cookies, pizza, bread, and other food items. Pillsbury was acquired by General Mills in 2001 for $10.4 billion. Pillsbury is likely to be classified as a(n)

Use the information below to answer the following question(s) : The following data relates to the Miracle Corporation and its Toy Division. -What is the Toy Division's Return on Investment (ROI) ?