Question 1

What do marketing managers mean by the phrase, "making the numbers?"

Accepted Answer

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Question 2

The manager of Devon Company's Furniture Division is not satisfied with the level of return on investment that the division achieved this year. What can be done to improve return on investment?

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Question 3

Distinguish between static and flexible budgets. Give an example of how flexible budgets might be used by a business.

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Question 4

When would a variance be labeled as favorable?

Accepted Answer

A)  When standard costs are equal to actual costs 
B)  When standard costs are less than actual costs 
C)  When expected sales are greater than actual sales 
D)  When actual costs are less than standard costs

Question 5

The practice of delegating authority and responsibility is referred to as

Accepted Answer

A)  decentralization. 
B)  standard costing. 
C)  management by exception. 
D)  centralization of authority.

Question 6

Based on the information given for a variance, indicate whether the variance is favorable or unfavorable. $$\begin{array} { | l | l | l | l | } 
\hline \text { Item to classify } & \text { Flexible budget } & \text { Actual } & \begin{array} { l } 
\text { Variance - Favorable or } \
\text { Unfavorable? }
\end{array} \
\hline \text { Contribution margin } & \$ 125,000 & \$ 120,000 & \
\hline
\end{array}$$

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Question 7

What is a balanced scorecard? How is the balanced scorecard used in performance evaluation?

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Question 8

The Brookings Company had a 12% return on a $50,000 investment in new equipment. The investment resulted in increased sales, and the resultant increase in income amounted to 4% of the increase in sales. Brookshire's turnover was

Accepted Answer

A)  1. 
B)  1.5. 
C)  2. 
D)  3.

Question 9

Poxahatchee Products provided the following selected information about its consumer products division for 2012: $\begin{array}{lc}
\text { Desired ROI } & 10 \% \
\text { Net Income } & \$ 150,000 \
\text { Residual Income } & \$ 50,000
\end{array}$ Based on this information, the division's investment amount (amount of operating assets) was

Accepted Answer

A)  $700,000. 
B)  $1,000,000. 
C)  $4,000,000. 
D)  $20,000,000.

Question 10

Matching. Select the term that best fits the definition or description; enter the number of the term in the column for Your Answer.

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The answer of Matching. Select the term that best fits...

Question 11

Managers should be praised or punished based on variances.

Accepted Answer

A) True 
 B)False

Question 12

Mindy Norton Company reported the following information for 2012: $$\begin{array} { l r } 
\text { Sales } & \$ 500,000 \
\text { Average Operating Assets } & \$ 300,000 \
\text { Desired ROI } & 10 \% \
\text { Net Income } & \$ 45,000
\end{array}$$ 
Required:
Based on this information, calculate the company's residual income for 2012.

Accepted Answer

The answer of Mindy Norton Company reported the following information...

Question 13

Johansson Company developed the following static budget at the beginning of the company's accounting period: $$\begin{array} { l r } 
\text { Revenue } ( 8,000 \text { units } ) & \$ 16,000 \
\text { Variable costs } & \underline { 4,000 } \
\text { Contribution margin } & \$ 12,000 \
\text { Fixed costs } & \underline { 4,000 } \
\text { Net income } & \$ 8,000
\end{array}$$ If the actual volume of sales was 8,200 units, the flexible budget would show variable costs of

Accepted Answer

A)  $16,400. 
B)  $4,000. 
C)  $4,100. 
D)  $4,800.

Question 14

Based on the information given for a variance, indicate whether the variance is favorable or unfavorable. $$\begin{array} { | l | l | l | l | } 
\hline \text { Item to classify } & \text { Flexible budget } & \text { Actual } & \begin{array} { l } 
\text { Variance - Favorable or } \
\text { Unfavorable? }
\end{array} \
\hline \text { Cost of direct materials } & \$ 30,000 & \$ 31,200 & \
\hline
\end{array}$$

Accepted Answer

The answer of Based on the information given for a...

Question 15

For 2012, an investment center of Lawson Company reported operating income of $420,000 on total operating assets of $2,600,000. The company has established a target ROI of 14% for the investment center. Last year, the investment center's ROI was 11.9%.
Required:
Calculate the 2012 return on investment for the investment center. Compare its performance for 2012 with both the performance from the previous year and the target ROI.

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Question 16

How does the use of standard costs fit with the philosophy of management by exception?

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Question 17

Bilbo Company evaluates its managers on the basis of return on investment (ROI). Division Three has an ROI of 15% while the company as a whole has an ROI of only 10%. Which of the following performance measures will motivate the managers of Division Three to accept a project earning a 12% return?

Accepted Answer

A)  Return on investment (ROI) 
B)  Residual income (RI) 
C)  Both ROI and RI will motivate the manager to accept the project. 
D)  Neither ROI nor RI will motivate the manager to accept the project.

Question 18

Under what circumstances is a sales variance favorable?

Accepted Answer

The answer of Under what circumstances is a sales variance...

Question 19

Use the following information to answer Question. The Furniture Division of Waverly Company reports the following results for 2012: $$\begin{array} { l l } 
\text { Revenues } & \$ 400,000 \
\text { Operating expenses } & \$ 360,000 \
\text { Operating income } & \$ 40,000 \
\text { Operating assets } & \$ 500,000
\end{array}$$ 
Waverly Company has set a target return on investment (ROI) of 12% for the Furniture Division.
Based on the information provided for Furniture, calculate its margin and turnover for 2012, and then use these amounts to calculate ROI.

Accepted Answer

The answer of Use the following information to answer Question....

Question 20

Summer Company's static budget is based on a planned activity level of 25,000 units. Later, the company's management accountant prepared a budget based on 30,000 units. The company actually produced and sold 29,000 units. In evaluating its performance, management should compare the company's actual revenues and costs to which of the following budgets?

Accepted Answer

A)  A budget based on 29,000 units 
B)  A budget based on 30,000 units 
C)  A budget based on 25,000 units 
D)  Either a budget based on 29,000 units or a budget based on 25,000 units

Exam 15: Performance Evaluation