FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 11: Performance Measurement in Decentralized Organizations

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

Multiple Choice

Review LaterAdd Note

Review Later

The Consumer Products Division of Goich Corporation had average operating assets of $800,000 and net operating income of $81,300 in May. The minimum required rate of return for performance evaluation purposes is 10%. What was the Consumer Products Division's residual income in May?

A) $(1,300)
B) $8,130
C) $1,300
D) $(8,130)

E) C) and D)
F) B) and C)

Correct Answer

verified

Show Answer

Question 42

True/False

Review LaterAdd Note

Review Later

A profit center is responsible for generating revenue, but it is not responsible for controlling costs.

A) True
B) False

Correct Answer

verified

Show Answer

Question 43

Multiple Choice

Review LaterAdd Note

Canedo Inc. reported the following results from last year's operations: $\begin{array}{lrr}\text { Sales } & \$ 9,600,000 \\\text { Variable expenses } & 7,170,000 \\\text { Contribution margin } & 2,430,000 \\\text { Fixed expenses } & 1,470,000 \\\text { Net operating income } & \$ 960,000 \\\text { Average operating assets } & \$ \quad 4,000,000\end{array}$ At the beginning of this year, the company has a $700,000 investment opportunity with the following characteristics: $\begin{array}{lc}\text { Sales } & \$ 2,310,000 \\\text { Contribution margin ratio } & 60 \% \text { of sales } \\\text { Fixed expenses } & \$ 1,201,200\end{array}$ If the company pursues the investment opportunity and otherwise performs the same as last year, the combined turnover for the entire company will be closest to:

Familia 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 13%. Required: 1. What was last year's return on investment (ROI)? (Round to the nearest 0.1%.) 2. What is the ROI related to this year's investment opportunity? (Round to the nearest 0.1%.) 3. 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%.) 4. 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?

When used in return on investment (ROI) calculations, turnover equals sales divided by average operating assets.

Largo Company recorded for the past year sales of $750,000 and average operating assets of $375,000. What is the margin that Largo Company needed to earn in order to achieve an ROI of 15%?

Bonilla Inc. has a $700,000 investment opportunity with the following characteristics: $\begin{array}{lc}\text { Sales } & \$ 2,240,000 \\\text { Contribution margin ratio } & 40 \% \text { of sales } \\\text { Fixed expenses } & \$ 739,200\end{array}$ The margin for the investment opportunity is closest to:

Ranallo Inc. reported the following results from last year's operations: $\begin{array}{lr}\text { Sales } & \$ 11,400,000 \\\text { Variable expenses } & \underline{7,480,000} \\\text { Contribution margin } & 3,920,000 \\\text { Fixed expenses } & \underline{3,008,000} \\\text { Net operating income } & \$ 912,000 \\\text { Average operating assets } & \$ 6,000,000\end{array}$ At the beginning of this year, the company has a $1,800,000 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? 11. What was last year's residual income? 12. What is the residual income of this year's investment opportunity? 13. If the company pursues the investment opportunity and otherwise performs the same as last year, what will be the overall residual income this year? 14. If Westerville's CEO earns a bonus only if residual income for this year exceeds residual income for last year, would the CEO pursue the investment opportunity?

If a strategy is not working, it should become evident on the balanced scorecard when some of the predicted effects don't occur.

Youns Inc. reported the following results from last year's operations: $\begin{array}{lr}\text { Sales } & \$ 10,500,000 \\\text { Variable expenses } & 6,610,000 \\\text { Contribution margin } & 3,890,000 \\\text { Fixed expenses } & 3,260,000 \\\text { Net operating income } & \$ \quad 630,000 \\\end{array}$ The company's average operating assets were $5,000,000. At the beginning of this year, the company has a $1,400,000 investment opportunity that involves sales of $2,800,000, fixed expenses of $616,000, and a contribution margin ratio of 30% of sales. If the company pursues the investment opportunity and otherwise performs the same as last year, the combined turnover for the entire company will be closest to:

Residual income can be used most effectively in comparing the performance of divisions of different size.

Parsa Inc. reported the following results from last year's operations: At the beginning of this year, the company has a $1,100,000 investment opportunity with the following characteristics: Last year's return on investment (ROI) was closest to:

Serie Inc. reported the following results from last year's operations: At the beginning of this year, the company has a $2,100,000 investment opportunity with the following characteristics: If the company pursues the investment opportunity and otherwise performs the same as last year, the combined margin for the entire company will be closest to:

If the MCE is equal to 0.6, then 60% of the time a unit is in process is spent on activities that add value to the product.

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 turnover used to compute ROI is closest to:

Cabell Products is a division of a major corporation. Last year the division had total sales of $25,320,000, net operating income of $1,924,320, and average operating assets of $6,000,000. The company's minimum required rate of return is 10%. The division's margin is closest to:

Navern Corporation manufactures and sells custom home elevators. From the time an order is placed until the time the elevator is installed in the customer's home averages 90 days. This 90 days is spent as follows: $\begin{array}{lr}\text { Wait time } & \text { 40 days } \\\text { Inspection time } & \text { 2 days } \\\text { Process time } & 18 \text { days } \\\text { Move time } & 2 \text { odays } \\\text { Queue time } & 1 \text { ddays }\end{array}$ What is Navern's manufacturing cycle efficiency (MCE) for its elevators?

Santoyo Corporation keeps careful track of the time required to fill orders. Data concerning a particular order appear below: $\begin{array}{lr}& \text { Hours } \\ \text { Wait time } & 28.0 \\\text { Process time } & 1.0 \\\text { Inspection time }& 0.4 \\\text { Move time } & 3.2 \\\text { Queue time } & 5.1\end{array}$ The delivery cycle time was:

Land held for possible plant expansion would be included as an operating asset when computing return on investment (ROI).

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 return on investment (ROI) is closest to: