Question 1

What is division's Y ROI for product B?

Accepted Answer

A)  12.0%. 
B)  10.0%. 
C)  11.0%. 
D)  12.5%. 
A)  12.0%. 
B)  10.0%. 
C)  11.0%. 
D)  12.5%.

Question 2

Which of the following is not a strategy of the learning and growth lens of a balanced scorecard?

Accepted Answer

A)  Improve employee relations. 
B)  Improve customer relations. 
C)  Improve employee productivity. 
D)  Increase new product development. 
A)  Improve employee relations. 
B)  Improve customer relations. 
C)  Improve employee productivity. 
D)  Increase new product development.

Question 3

Premo Pens is a division of InCommunicato, Inc. Premo generates annual revenue of $162,000, operating earnings of $55,000, and has average assets of $400,000. InCommunicato expects its divisions to earn a minimum required return of 12 percent. Which of the following does not represent either return on sales, residual income, or return on investment for Premo Pens?

Accepted Answer

A)  13.75%. 
B)  $7,000. 
C)  34%. 
D)  40.5%. 
E)  $9,000. 
A)  13.75%. 
B)  $7,000. 
C)  34%. 
D)  40.5%. 
E)  $9,000.

Question 4

Using only ROI as a business performance measure often leads to the best decisions.

Accepted Answer

A) True 
 B)False

Question 5

The return on investment is calculated by:

Accepted Answer

A)  Multiplying the capital turnover by the return on sales. 
B)  Dividing the capital turnover by the return on sales. 
C)  Dividing average invested capital by sales. 
D)  Multiplying operating income by capital turnover. 
A)  Multiplying the capital turnover by the return on sales. 
B)  Dividing the capital turnover by the return on sales. 
C)  Dividing average invested capital by sales. 
D)  Multiplying operating income by capital turnover.

Question 6

The set of activities necessary to create and distribute a desirable product or service to a customer is known as:

Accepted Answer

A)  A customer perspective. 
B)  Business process perspective. 
C)  Balanced scorecard. 
D)  Value chain. 
A)  A customer perspective. 
B)  Business process perspective. 
C)  Balanced scorecard. 
D)  Value chain.

Question 7

Bonuses may be used to reward employees who meet performance goals.

Accepted Answer

A) True 
 B)False

Question 8

The following information is available for the Hancock Company.
Compute the answers for items A-D.
 $$\begin{array} { l l } 
\text { Sales } & \$ 756,000 \
\text { Cost of Sales } & \$ 315,000 \
\text { Operating Expenses } & \$ 252,000 \
\text { Operating Earnings } & \mathrm { A } \
\text { Average Invested Capital } & \$ 1,890,000 \
\text { Minimum Acceptable Return } & 12 \% \
\text { Residual Income } & \mathrm { B } \
\text { Capital Turnover } & \mathrm { C } \
\text { ROI } & \mathrm { D }
\end{array}$$

Accepted Answer

(A) $189,0

Question 9

Management compensation plans:

Accepted Answer

A)  May be affected by adopting International Financial Reporting Standards since earnings under IFRS are typically higher than GAAP earnings. 
B)  May be affected by adopting International Financial Reporting Standards since earnings under IFRS are typically lower than GAAP earnings. 
C)  Will not be affected by IFRS since earnings are equivalent to GAAP. 
D)  Are decided by shareholders who do not consider GAAP or IFRS when deciding how much compensation managers receive. 
A)  May be affected by adopting International Financial Reporting Standards since earnings under IFRS are typically higher than GAAP earnings. 
B)  May be affected by adopting International Financial Reporting Standards since earnings under IFRS are typically lower than GAAP earnings. 
C)  Will not be affected by IFRS since earnings are equivalent to GAAP. 
D)  Are decided by shareholders who do not consider GAAP or IFRS when deciding how much compensation managers receive.

Question 10

What is the return on investment for Brookes, Inc?

Accepted Answer

A)  70%. 
B)  19%. 
C)  13%. 
D)  9%. 
A)  70%. 
B)  19%. 
C)  13%. 
D)  9%.

Question 11

Which of the following are not part of the components of the DuPont system for measuring and evaluating business performance?

Accepted Answer

A)  Return on sales. 
B)  Residual income. 
C)  Return on investment. 
D)  Capital turnover. 
E)  Number of patents. 
A)  Return on sales. 
B)  Residual income. 
C)  Return on investment. 
D)  Capital turnover. 
E)  Number of patents.

Question 12

Calculate and explain residual income and economic value added.

Accepted Answer

Residual income is the amount by which o

Question 13

A stock option is a right to sell a certain number of shares at a specific price sometime in the future.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not represented in the balanced scorecard?

Accepted Answer

A)  A learning and growth perspective. 
B)  The internal business process perspective. 
C)  The government's perspective. 
D)  The customers' perspective. 
E)  The financial perspective. 
A)  A learning and growth perspective. 
B)  The internal business process perspective. 
C)  The government's perspective. 
D)  The customers' perspective. 
E)  The financial perspective.

Question 15

Morgan Company has a ROI of 5% and a capital turnover of 8%. What is its return on sales?

Accepted Answer

A)  133%. 
B)  75%. 
C)  62.5%. 
D)  Some other percentage. 
A)  133%. 
B)  75%. 
C)  62.5%. 
D)  Some other percentage.

Question 16

Which of the following is not likely to be included in the typical components of management compensation?

Accepted Answer

A)  Company stock options. 
B)  Cash bonuses. 
C)  Free meals. 
D)  Fixed salary. 
E)  Company stock. 
A)  Company stock options. 
B)  Cash bonuses. 
C)  Free meals. 
D)  Fixed salary. 
E)  Company stock.

Question 17

The return on investment is calculated by multiplying the capital turnover by the return on sales.

Accepted Answer

A) True 
 B)False

Question 18

Operating earnings rather than net income is used to compute return on sales.

Accepted Answer

A) True 
 B)False

Question 19

How is the balanced scorecard used to identify, evaluate, and reward business performance?

Accepted Answer

The balanced scorecard uses four lenses

Question 20

The Parry company provided the following information regarding its operations: What is Parry's ROI for the year ending 2012?

Accepted Answer

A)  1.50%. 
B)  2.72%. 
C)  1.76%. 
D)  1.82%. 
A)  1.50%. 
B)  2.72%. 
C)  1.76%. 
D)  1.82%.

Exam 25: Rewarding Business Performance

What is division's Y ROI for product B?

Which of the following is not a strategy of the learning and growth lens of a balanced scorecard?

Using only ROI as a business performance measure often leads to the best decisions.

The return on investment is calculated by:

The set of activities necessary to create and distribute a desirable product or service to a customer is known as:

Bonuses may be used to reward employees who meet performance goals.

The following information is available for the Hancock Company. Compute the answers for items A-D. Sales \ 756,000 Cost of Sales \ 315,000 Operating Expenses \ 252,000 Operating Earnings Average Invested Capital \ 1,890,000 Minimum Acceptable Return 12\% Residual Income Capital Turnover ROI

Management compensation plans:

What is the return on investment for Brookes, Inc?

Which of the following are not part of the components of the DuPont system for measuring and evaluating business performance?

Calculate and explain residual income and economic value added.

A stock option is a right to sell a certain number of shares at a specific price sometime in the future.

Which of the following is not represented in the balanced scorecard?

Morgan Company has a ROI of 5% and a capital turnover of 8%. What is its return on sales?

Which of the following is not likely to be included in the typical components of management compensation?

The return on investment is calculated by multiplying the capital turnover by the return on sales.

Operating earnings rather than net income is used to compute return on sales.

How is the balanced scorecard used to identify, evaluate, and reward business performance?

The Parry company provided the following information regarding its operations: What is Parry's ROI for the year ending 2012?

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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