The divisional managers of West plc have requested that the method for calculating bonuses at the year be reviewed. Senior managers at the head office have proposed that a bonus of £40,000 will be paid to the divisional manager who has the best return on investment (ROI) of the 3 divisions and this policy is consistent with previous years. Divisional managers want the senior managers to take into account controllable costs and profits and residual income (RI) when deciding bonuses and also to include non-financial measures of performance. The main reason given by the head office for using ROI is that it is understood by all managers and that it is used by external analysts. Summary of Management Accounts to 31 December 1997 \(\begin{array}{|l|l|l|l|} \hline & \text { Southern }(£) & \text { Eastern }(£) & \text { Western }(£) \\ \hline \text { Sales } & 5,400,000 & 5,000,000 & 5,590,000 \\ \hline \text { Controllable costs } & 3,700,000 & 3,502,000 & 3,660,000 \\ \hline \text { Head Office Charges } & 998,000 & 1,282,000 & 1,170,000 \\ \hline \text { Net Profit } & 702,000 & 716,000 & 760,000 \\ \hline \end{array}\) Capital Employed \(\begin{array}{|l|l|l|l|} \hline & \text { Southern }(£) & \text { Eastern }(£) & \text { Western }(£) \\ \hline \text { Total Investment } & 4,700,000 & 5,100,000 & 5,200,000 \\ \hline \text { Controllable Investment } & 4,000,000 & 4,100,000 & 4,274,000 \\ \hline \end{array}\) Cost of Capital The head office has estimated that the group cost of capital is 10% Financial and non-financial measures of performance The divisional managers normally report on a wide range of financial measures each month to the head office but only use non-financial measures internally and each divisional manager is allowed to use their discretion when deciding on the range and number of measures to use. - Calculate the Controllable Residual Income for the Southern Division

A) £1,000,000. B) £1,200,000 C) £1,300,000. D) £232,000. A) £1,000,000. B) £1,200,000 C) £1,300,000. D) £232,000.

The divisional managers of West plc have requested that the method for calculating bonuses at the year be reviewed. Senior managers at the head office have proposed that a bonus of £40,000 will be paid to the divisional manager who has the best return on investment (ROI) of the 3 divisions and this policy is consistent with previous years. Divisional managers want the senior managers to take into account controllable costs and profits and residual income (RI) when deciding bonuses and also to include non-financial measures of performance. The main reason given by the head office for using ROI is that it is understood by all managers and that it is used by external analysts. Summary of Management Accounts to 31 December 1997 \(\begin{array}{|l|l|l|l|} \hline & \text { Southern }(£) & \text { Eastern }(£) & \text { Western }(£) \\ \hline \text { Sales } & 5,400,000 & 5,000,000 & 5,590,000 \\ \hline \text { Controllable costs } & 3,700,000 & 3,502,000 & 3,660,000 \\ \hline \text { Head Office Charges } & 998,000 & 1,282,000 & 1,170,000 \\ \hline \text { Net Profit } & 702,000 & 716,000 & 760,000 \\ \hline \end{array}\) Capital Employed \(\begin{array}{|l|l|l|l|} \hline & \text { Southern }(£) & \text { Eastern }(£) & \text { Western }(£) \\ \hline \text { Total Investment } & 4,700,000 & 5,100,000 & 5,200,000 \\ \hline \text { Controllable Investment } & 4,000,000 & 4,100,000 & 4,274,000 \\ \hline \end{array}\) Cost of Capital The head office has estimated that the group cost of capital is 10% Financial and non-financial measures of performance The divisional managers normally report on a wide range of financial measures each month to the head office but only use non-financial measures internally and each divisional manager is allowed to use their discretion when deciding on the range and number of measures to use. -Calculate the Return on Investment for the Eastern Division

A) 12.1%. B) 6.9%. C) 3.3%. D) 4.2%. A) 12.1%. B) 6.9%. C) 3.3%. D) 4.2%.

The divisional managers of West plc have requested that the method for calculating bonuses at the year be reviewed. Senior managers at the head office have proposed that a bonus of £40,000 will be paid to the divisional manager who has the best return on investment (ROI) of the 3 divisions and this policy is consistent with previous years. Divisional managers want the senior managers to take into account controllable costs and profits and residual income (RI) when deciding bonuses and also to include non-financial measures of performance. The main reason given by the head office for using ROI is that it is understood by all managers and that it is used by external analysts. Summary of Management Accounts to 31 December 1997 \(\begin{array}{|l|l|l|l|} \hline & \text { Southern }(£) & \text { Eastern }(£) & \text { Western }(£) \\ \hline \text { Sales } & 5,400,000 & 5,000,000 & 5,590,000 \\ \hline \text { Controllable costs } & 3,700,000 & 3,502,000 & 3,660,000 \\ \hline \text { Head Office Charges } & 998,000 & 1,282,000 & 1,170,000 \\ \hline \text { Net Profit } & 702,000 & 716,000 & 760,000 \\ \hline \end{array}\) Capital Employed \(\begin{array}{|l|l|l|l|} \hline & \text { Southern }(£) & \text { Eastern }(£) & \text { Western }(£) \\ \hline \text { Total Investment } & 4,700,000 & 5,100,000 & 5,200,000 \\ \hline \text { Controllable Investment } & 4,000,000 & 4,100,000 & 4,274,000 \\ \hline \end{array}\) Cost of Capital The head office has estimated that the group cost of capital is 10% Financial and non-financial measures of performance The divisional managers normally report on a wide range of financial measures each month to the head office but only use non-financial measures internally and each divisional manager is allowed to use their discretion when deciding on the range and number of measures to use. - Calculate the Return on Investment for the Southern Division

A) 14.9%. B) 12.3%. C) 2.8%. D) 4.5%. A) 14.9%. B) 12.3%. C) 2.8%. D) 4.5%.

Exam 14: Strategy and Control

The divisional managers of West plc have requested that the method for calculating bonuses at the year be reviewed. Senior managers at the head office have proposed that a bonus of £40,000 will be paid to the divisional manager who has the best return on investment (ROI) of the 3 divisions and this policy is consistent with previous years. Divisional managers want the senior managers to take into account controllable costs and profits and residual income (RI) when deciding bonuses and also to include non-financial measures of performance. The main reason given by the head office for using ROI is that it is understood by all managers and that it is used by external analysts. Summary of Management Accounts to 31 December 1997 Southern (£) Eastern (£) Western (£) Sales 5,400,000 5,000,000 5,590,000 Controllable costs 3,700,000 3,502,000 3,660,000 Head Office Charges 998,000 1,282,000 1,170,000 Net Profit 702,000 716,000 760,000 Capital Employed Southern (£) Eastern (£) Western (£) Total Investment 4,700,000 5,100,000 5,200,000 Controllable Investment 4,000,000 4,100,000 4,274,000 Cost of Capital The head office has estimated that the group cost of capital is 10% Financial and non-financial measures of performance The divisional managers normally report on a wide range of financial measures each month to the head office but only use non-financial measures internally and each divisional manager is allowed to use their discretion when deciding on the range and number of measures to use. - Calculate the Controllable Residual Income for the Southern Division

(Multiple Choice)

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Question 61

On page 576 of chapter 14, Quaker Oats' adoption of EVA is outlined. Explain how EVA could have led to this improvement.

(Essay)

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Question 62

The divisional managers of West plc have requested that the method for calculating bonuses at the year be reviewed. Senior managers at the head office have proposed that a bonus of £40,000 will be paid to the divisional manager who has the best return on investment (ROI) of the 3 divisions and this policy is consistent with previous years. Divisional managers want the senior managers to take into account controllable costs and profits and residual income (RI) when deciding bonuses and also to include non-financial measures of performance. The main reason given by the head office for using ROI is that it is understood by all managers and that it is used by external analysts. Summary of Management Accounts to 31 December 1997 Southern (£) Eastern (£) Western (£) Sales 5,400,000 5,000,000 5,590,000 Controllable costs 3,700,000 3,502,000 3,660,000 Head Office Charges 998,000 1,282,000 1,170,000 Net Profit 702,000 716,000 760,000 Capital Employed Southern (£) Eastern (£) Western (£) Total Investment 4,700,000 5,100,000 5,200,000 Controllable Investment 4,000,000 4,100,000 4,274,000 Cost of Capital The head office has estimated that the group cost of capital is 10% Financial and non-financial measures of performance The divisional managers normally report on a wide range of financial measures each month to the head office but only use non-financial measures internally and each divisional manager is allowed to use their discretion when deciding on the range and number of measures to use. -Calculate the Return on Investment for the Eastern Division

(Multiple Choice)

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Question 63

Net operating income is income after interest and taxes

(True/False)

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Question 64

The divisional managers of West plc have requested that the method for calculating bonuses at the year be reviewed. Senior managers at the head office have proposed that a bonus of £40,000 will be paid to the divisional manager who has the best return on investment (ROI) of the 3 divisions and this policy is consistent with previous years. Divisional managers want the senior managers to take into account controllable costs and profits and residual income (RI) when deciding bonuses and also to include non-financial measures of performance. The main reason given by the head office for using ROI is that it is understood by all managers and that it is used by external analysts. Summary of Management Accounts to 31 December 1997 Southern (£) Eastern (£) Western (£) Sales 5,400,000 5,000,000 5,590,000 Controllable costs 3,700,000 3,502,000 3,660,000 Head Office Charges 998,000 1,282,000 1,170,000 Net Profit 702,000 716,000 760,000 Capital Employed Southern (£) Eastern (£) Western (£) Total Investment 4,700,000 5,100,000 5,200,000 Controllable Investment 4,000,000 4,100,000 4,274,000 Cost of Capital The head office has estimated that the group cost of capital is 10% Financial and non-financial measures of performance The divisional managers normally report on a wide range of financial measures each month to the head office but only use non-financial measures internally and each divisional manager is allowed to use their discretion when deciding on the range and number of measures to use. - Calculate the Return on Investment for the Southern Division

(Multiple Choice)

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Question 65

Explain the differences between traceable and common fixed costs and the importance of differentiating between them in measuring performance.

(Essay)

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Question 66

Contribution income statements are used to measure the performance of

(Multiple Choice)

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Question 67

The segment margin for Product T was

(Multiple Choice)

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Question 68

If a cost must be arbitrarily allocated in order to be assigned to a particular segment, then that cost is a common cost

(True/False)

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Question 69

Operating assets include cash, accounts receivable, and inventory but not any depreciable fixed assets

(True/False)

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Question 70

A disadvantage of the return on investment formula is that it forces the manager to control sales volume and operating assets, but not expenses

(True/False)

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Question 71

If expenses exceed revenues in a department, then it would be termed a cost center

(True/False)

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Question 72

Showing 61 - 72 of 72

On page 576 of chapter 14, Quaker Oats' adoption of EVA is outlined. Explain how EVA could have led to this improvement.

Net operating income is income after interest and taxes

Explain the differences between traceable and common fixed costs and the importance of differentiating between them in measuring performance.

Contribution income statements are used to measure the performance of

The segment margin for Product T was

If a cost must be arbitrarily allocated in order to be assigned to a particular segment, then that cost is a common cost

Operating assets include cash, accounts receivable, and inventory but not any depreciable fixed assets

A disadvantage of the return on investment formula is that it forces the manager to control sales volume and operating assets, but not expenses

If expenses exceed revenues in a department, then it would be termed a cost center

The Role of Accounting Information in Management Decision Making

Cost Concepts, Behaviour and Estimation

A Costing Framework and Cost Allocation

Costvolumeprofit Cvp Analysis

Planning Budgeting and Behaviour

Operational Budgets

Job Costing Systems

Process Costing Systems

Absorption and Variable Costing

Flexible Budgets, Standard Costs and Variance Analysis

Variance Analysis: Revenue and Cost

Activity Analysis: Costing and Management

Relevant Costs for Decision Making

Capital Budgeting and Strategic Investment Decisions

The Strategic Management of Costs and Revenues

Strategic Management Control: a Lean Perspective

Responsibility Accounting, Performance Evaluation and Transfer Pricing

The Balanced Scorecard and Strategy Maps

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