Question 1

When measuring average operating assets, depreciable fixed assets may be included at any value except: a. Gross book value.
B) Net book value.
C) Current replacement value.
D) Original cost less estimated salvage.

Accepted Answer

The answer of When measuring average operating assets, depreciable fixed...

Question 2

Supercircuits is a decentralized company and has a required opportunity cost of capital of 15%. The home computer division, whose current ROI is 10%, is considering an investment which will earn a 13% return. The gaming division, whose current ROI is 20%, is considering an investment which will earn a 17% return. If the objective is to maximize residual income, each division will make the following choice:

Accepted Answer

The answer of Supercircuits is a decentralized company and has...

Question 3

Which of the following describes ROI? a. It fosters underinvestment.
B) It ignores future period considerations.
C) It is less suitable for evaluating long-term performance.
D) None of the above.
E) All of the above.

Accepted Answer

The answer of Which of the following describes ROI? a....

Question 4

Which of the following is not a popular measure of investment center performance? a. Employee turnover.
B) Return on investment.
C) Residual income.
D) Economic value added.
E) None of the above.

Accepted Answer

The answer of Which of the following is not a...

Question 5

Which of the following is not a role of a cost center manager in an organization? a. To achieve cost targets for a given level of output In the short term.
B) Making continuous efficiency improvements to cut costs in the long term.
C) To achieve sales targets for a given level of output.
D) Neither A nor B are roles of a cost center manager.

Accepted Answer

The answer of Which of the following is not a...

Question 6

The Gallagher Company is decentralized and has a required opportunity cost of capital of 20%. The West division, whose current return on investment (ROI) is 15%, is considering an investment which will earn a return of 18%. The East Division, whose current ROI is 25%, is considering an investment which will earn a return of 22%. If the objective is to maximize ROI, each division will make the following choice:

Accepted Answer

The answer of The Gallagher Company is decentralized and has...

Question 7

In 2009 the Porter Company reported the following information:  The company's required rate of return was: a. 11.3%
B) 33.3%
C) 15%
D) 29%

Accepted Answer

The answer of In 2009 the Porter Company reported the...

Question 8

The Versa Company had the following results for 2009:  Versa Company's average operating assets were: a. $140,000
B) $40,000
C) $490,000
D) $21,000

Accepted Answer

The answer of The Versa Company had the following results...

Question 9

In 2009 the Yankee Company had average operating assets of $200,000. If the company reported a return on investment of 50% then net operating income for 2009 must have been: a. $100,000
B) $50,000
C) $400,000
D) $200,000

Accepted Answer

The answer of In 2009 the Yankee Company had average...

Question 10

The Brett Company has provided the following information for its two stores:  If Store B increases its sales by $50,000 with no change in fixed expenses the overall company net income will: a. Increase by $12,500.
B) Increase by $35,000.
C) Increase by $50,000.
D) Increase by $15,000.

Accepted Answer

The answer of The Brett Company has provided the following...

Question 11

Which of the following is not a performance measure used to evaluate a profit center's manager? a. Customer satisfaction.
B) How well the manager utilizes funds made available to his/her division.
C) Employee turnover.
D) Market share.
E) All of the above are performance measures used to evaluate a profit center's manager.

Accepted Answer

The answer of Which of the following is not a...

Question 12

The Greenberg Company reported average operating assets of $400,000 and sales of $1,200,000 in 2009. If the company's margin is 12%, their ROI must have been: a. 24%
B) 36%
C) 33.3%
D) 40%

Accepted Answer

The answer of The Greenberg Company reported average operating assets...

Question 13

Which of the following is the formula for ROI? a. Profit ÷ Investment.
B) (Profit ÷ Sales) x (Sales ÷ Investment).
C) Profit margin x Asset Turnover.
D) None of the above.
E) All of the above.

Accepted Answer

The answer of Which of the following is the formula...

Question 14

A cost center for which there is a clear relation between inputs and outputs is referred to as a: a. Discretionary cost center.
B) Budget center.
C) Engineered cost center.
D) Kaizen center.
E) None of the above.

Accepted Answer

The answer of A cost center for which there is...

Question 15

The Hoboken Company has two divisions, North and South. In July, contribution margin for North was $126,000 and sales in the South division were $375,000 with a contribution margin ratio of 40%. Traceable fixed costs for the divisions totaled $101,000. If net operating income was $69,000, then total fixed costs must have been: a. $106,000
B) $207,000
C) $282,000
D) $170,000

Accepted Answer

The answer of The Hoboken Company has two divisions, North...

Question 16

Firms often view investment centers as: a. Support activities.
B) Discretionary cost centers.
C) Stand-alone businesses.
D) Revenue centers.
E) None of the above.

Accepted Answer

The answer of Firms often view investment centers as: a....

Question 17

Which of the following does not describe Kaizen? a. Encourages and rewards employees who constantly seek and suggest improvements to activities and business processes.
B) Is a philosophy of continuous improvement.
C) Involves comparing the effectiveness and efficiency of various activities and business processes in a firm against the best practices in the industry.
D) None of the above statements describe Kaizen.
E) All of the above describe Kaizen.

Accepted Answer

The answer of Which of the following does not describe...

Question 18

Which of the following is not an option in deciding how to incorporate depreciable fixed assets in measuring divisional investment? a. Net book value.
B) Gross book value.
C) Transfer price.
D) Replacement cost of the asset.
E) Current value of the asset.

Accepted Answer

The answer of Which of the following is not an...

Question 19

The Allentown Company reported operating income of $25,000 for 2009. If average operating assets for the year were $80,000 and the company had a required return of 12% the company's residual income was: a. $28,000
B) $22,000
C) $15,400
D) $6,600

Accepted Answer

The answer of The Allentown Company reported operating income of...

Question 20

The Grisham Company has reported the following information for 2009:  The company's economic value added is: a. $156,800
B) $220,000
C) $1,008,000
D) $851,200

Accepted Answer

The answer of The Grisham Company has reported the following...

Quiz 12: Performance Evaluation in Decentralized Organizations

When measuring average operating assets, depreciable fixed assets may be included at any value except: a. Gross book value. B) Net book value. C) Current replacement value. D) Original cost less estimated salvage.

Which of the following describes ROI? a. It fosters underinvestment. B) It ignores future period considerations. C) It is less suitable for evaluating long-term performance. D) None of the above. E) All of the above.

Which of the following is not a popular measure of investment center performance? a. Employee turnover. B) Return on investment. C) Residual income. D) Economic value added. E) None of the above.

In 2009 the Porter Company reported the following information: The company's required rate of return was: a. 11.3% B) 33.3% C) 15% D) 29%

The Versa Company had the following results for 2009: Versa Company's average operating assets were: a. $140,000 B) $40,000 C) $490,000 D) $21,000

In 2009 the Yankee Company had average operating assets of $200,000. If the company reported a return on investment of 50% then net operating income for 2009 must have been: a. $100,000 B) $50,000 C) $400,000 D) $200,000

The Brett Company has provided the following information for its two stores: If Store B increases its sales by $50,000 with no change in fixed expenses the overall company net income will: a. Increase by $12,500. B) Increase by $35,000. C) Increase by $50,000. D) Increase by $15,000.

The Greenberg Company reported average operating assets of $400,000 and sales of $1,200,000 in 2009. If the company's margin is 12%, their ROI must have been: a. 24% B) 36% C) 33.3% D) 40%

Which of the following is the formula for ROI? a. Profit ÷ Investment. B) (Profit ÷ Sales) x (Sales ÷ Investment). C) Profit margin x Asset Turnover. D) None of the above. E) All of the above.

A cost center for which there is a clear relation between inputs and outputs is referred to as a: a. Discretionary cost center. B) Budget center. C) Engineered cost center. D) Kaizen center. E) None of the above.

Firms often view investment centers as: a. Support activities. B) Discretionary cost centers. C) Stand-alone businesses. D) Revenue centers. E) None of the above.

Which of the following is not an option in deciding how to incorporate depreciable fixed assets in measuring divisional investment? a. Net book value. B) Gross book value. C) Transfer price. D) Replacement cost of the asset. E) Current value of the asset.

The Allentown Company reported operating income of $25,000 for 2009. If average operating assets for the year were $80,000 and the company had a required return of 12% the company's residual income was: a. $28,000 B) $22,000 C) $15,400 D) $6,600

The Grisham Company has reported the following information for 2009: The company's economic value added is: a. $156,800 B) $220,000 C) $1,008,000 D) $851,200