question

In computing the margin in a ROI analysis, which of the following is used?

answer

Sales in the denominator

question

The purpose of the data processing department of Falena Corporation is to assist the various departments of the corporation with their information needs free of charge. The Data Processing Department would be evaluated as:

answer

Cost Center

question

All other things the same, which of the following would increase residual income?

answer

Decrease in operating assets

question

Average operating assets are $110,000 and net operating income is $23,100. The company invests $25,000 in new assets for a project that will increase next operating income by $4,750. What will the return on investment (ROI) be for the new project?

answer

ROI = NOI/Assets ROI = 4,750/25,000 = 19%

question

Last year a company had a stockholder's equity of $160,000, net operating income of $16,000 and sales of $100,000. The turnover was 0.5. The return on invest (ROI) is:

answer

ROI = Net profit margin x Turnover ROI = 0.16 x 0.5 = 8% Margin = NOI/Sales Margin = 16,000/100,000 = 16%

question

A company's current net operating income is $16,800 and its average operating assets are $80,000. The company's required rate of return is 18%. A new project being considered would require an investment of $15,000 and would generate annual net operating income of $3,000. What is the residual income of the new project?

answer

RI = NOI (Desired/Minimum ROI x Assets Invested) RI = 3,000 - (18% x 15,000) = $300

question

Aide Industries is a division of a major corporation. Data concerning the most recent years appears below: Sales = $17,400,000 NOI = $870,000 Average Operating Assets = $4,000,000 What is the margin?

answer

Margin = NOI/Sales Margin = 870,000 / 17,400,000 = 5%

question

Beal Industries is a division of a major corporation. Last year the division had total sales of $20,160,000, net operating income of $1,592,640, and average operating assets of $8,000,000. What is the turnover?

answer

Turnover = Sales/Assets Turnover = $20,160,000/8,000,000 = 2.52

question

How many different responsibility centers exist?

answer

3

question

Determine the October 2012 ROI for an investment center providing the following information: Assets at 9/30/12 $20,000,000 Assets at 10/15/12 $18,595,000 Assets at 10/31/12 $22,000,000 Operating income for the month ended 10/31/12 $5,678,395

answer

ROI = NOI/Assets ROI = 5,678,395/20,000,000 = 28%

question

decision making is spread throughout the organization

answer

Decentralization

question

an information system that classifies data according to areas of responsibility and reports each area's activity based on categories that the assigned manager controls

answer

Responsibility Accounting

question

Used by organizations to assist in performance management and evaluation especially in a decentralized organization

answer

Responsibility Accounting

question

Use for any part of an organization whose manager has control and is accountable for cost, profit, and investments

answer

Responsibility Accounting

question

Cost, Profit, Investment

answer

What are the three primary types of responsibility accounting?

question

Manager has control over cost, but not revenue or investments (i.g. accounting)

answer

Cost Centers

question

standard costs

answer

How are cost centers evaluated?

question

Manager has responsibility for control over both cost and revenue

answer

Profit Centers

question

it is evaluated by comparing actual to budget

answer

How are profit responsibility centers evaluated?

question

manager has control over cost, revenue, and investments

answer

Investment Centers

question

evaluated using ROI and residual income

answer

How are Investment centers evaluated?

question

What is an investment center responsible for?

answer

earning an adequate return on investment or ROI

question

income before interest and taxes

answer

Net operating income

question

The percentage of each sales dollar that resulted in profit

answer

Margin

question

Measures the productivity of assets or the number of sales dollars generated by each dollar invested in assets

answer

Turnover

question

Increase sales, or reduce operating expenses or operating assets

answer

To increase ROI you must

question

another way to measure investment center's performance

answer

Residual Income

question

Net operating income that an investment center earns above a minimum required rate of return on its operating assets

answer

Residual Income

question

A variation of ____ is EVA (Economic Value Added)

answer

residual income

question

the shareholder wealth created by an investment center

answer

Economic Value Added (EVA)

question

Economic Activity (EVA)

answer

EVA = (after tax operating income - cost of capital in dollars) or (after tax operating income) - cost of capital x (total assets - current liabilities)

question

time from the receipt of a customer order to when it is completed and shipped

answer

Delivery Cycle Time

question

time required to turn raw materials into completed products

answer

Throughout or Manufacturing Cycle Time

question

focus on eliminating non-value added activities

answer

Manufacturing Cycle Efficiency

question

Who developed the balanced scorecard?

answer

Robert Kaplan and David Norton

question

Set of performance measures designed to support the company's strategy (or how to achieve the organization's goals)

answer

Balanced Scorecard

question

framework that links the perspectives of an organization four basic stakeholder groups with an organization's mission and vision ect.

answer

Balanced Scorecard

question

Organizations must add value to all groups in ___ and ____ in order to succeed

answer

long term and short term

question

financial (investors), learning and growth (employees), internal business processes, customers

answer

What are the 4 balanced scorecard groups?

question

A major disadvantage of decentralization is that lower-level managers may _____

answer

make decisions without fully understanding the big picture.

question

Under an ___ evaluation system, managers are encouraged to make investments that are profitable for the entire company, but that would be rejected when using the residual income approach

answer

ROI

question

Average operating assets $ 37,000 Sales 118,400 Contribution margin 20,800 Net operating income 6,512 The company's ROI is:

answer

Return on investment = (Sales ÷ Average operating assets) Return on investment = $6,512/$37,000

question

Sales $ 856,980 Average operating assets 372,600 Stockholders' equity 246,000 Net operating income 81,000 Residual income 45,000 The division's turnover for the past year was:

answer

Turnover = Sales ÷ Average operating assets Turnover = $856,980 ÷ $372,600 = 2.30

question

A company reported the following results: Average operating assets $ 380,000 Stockholders' equity $ 58,000 Sales $ 980,000 Net operating income $ 83,000 Minimum required rate of return 16 % The company's residual income is:

answer

Residual Income = NOI - (Minimum/Desired return x operating assets) Residual Income = 83,000 - (16% x $38,000)

question

Sales $ 300,000 Average operating assets 100,000 Stockholders' equity 60,000 Net operating income 27,000 Residual income 16,000 What was the company's minimum required rate of return for the past year?

answer

Minimum required return = Net operating income - Residual income Minimum required return = $27,000 - $16,000 = $11,000 Minimum required rate of return = Minimum required return ÷ Average operating assets Minimum required rate of return = $11,000 ÷ $100,000 = 11.00%

question

Wait time 15.7 days Inspection time 0.7 days Process time 3.7 days Move time 1.5 days Queue time 7.7 days The manufacturing cycle efficiency (MCE) would be:

answer

MCE = Process time ÷ Throughput time MCE = 3.7 days ÷ 13.6 days = 27.21%

question

Wait time 15.4 days Inspection time 3.0 days Process time 4.4 days Move time 3.8 days Queue time 10.4 days The throughput time would be:

answer

Throughput time = Process time + Inspection time + Move time + Queue time Throughput time = 4.4 days + 3.0 days + 3.8 days + 10.4 days = 21.6 days

question

land held for future use, investment in another company, building rented to someone else

answer

What is not included in operating assets?

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