Exam 10: Performance Measurement in Decentralized Organizations

Brodrick Corporation uses residual income to evaluate the performance of its divisions.The minimum required rate of return for performance evaluation purposes is 19%.The Games Division had average operating assets of $140,000 and net operating income of $25,900 in August. Required: What was the Games Division's residual income in August?

The return on investment (ROI)last year for the Hum Division was:

Some investment opportunities that should be accepted from the viewpoint of the entire company may be rejected by a manager who is evaluated on the basis of:

Tallon Inc.has a $1,200,000 investment opportunity that involves sales of $1,680,000, fixed expenses of $336,000, and a contribution margin ratio of 30% of sales.The turnover for this investment opportunity is closest to:

A segment of a business responsible for both revenues and expenses would be called:

Last year a company had sales of $600,000, a turnover of 3.6, and a return on investment of 18%.The company's net operating income for the year was:

Pankey Inc.has a $700,000 investment opportunity that would involve sales of $1,050,000, a contribution margin ratio of 40% of sales, and fixed expenses of $325,500.The company's minimum required rate of return is 18%.The residual income for this year's investment opportunity is closest to:

Willing 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 14%. Required: 1.What was last year's residual income? 2.What is the residual income of this year's investment opportunity? 3.If the company pursues the investment opportunity and otherwise performs the same as last year, what will be the overall residual income this year? 4.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?

Nasser Inc.reported the following results from last year's operations: Last year's return on investment (ROI)was closest to:

What is the delivery cycle time?

Tipton Division's average operating assets last year were:

A manager would generally like to see a trend indicating a decrease in setup time.

Fabbri Wares is a division of a major corporation.The following data are for the latest year of operations: Required: a.What is the division's return on investment (ROI)? b.What is the division's residual income?

The manufacturing cycle efficiency (MCE)was closest to:

Suppose a company evaluates divisional performance using both ROI and residual income.The company's minimum required rate of return for the purposes of residual income calculations is 12%.If a division has a residual income of $6,000, then its ROI is less than 12%.

If net operating income is $70,000, average operating assets are $250,000, and the minimum required rate of return is 16%, what is the residual income?

What was the West Division's residual income in August?

What was the Consumer Products Division's minimum required return in May?

The net operating income for Year 1 was:

Santoyo Corporation keeps careful track of the time required to fill orders.Data concerning a particular order appear below: The delivery cycle time was: