Chapter 10 Performance Evaluation Test Bank Answers

Managerial Accounting, 6e (Braun et al.)

Chapter 10 Performance Evaluation

10.1 Understand decentralization and describe different types of responsibility centers

1) There are two types of responsibility centers.

Diff: 1

LO: 10-1

EOC: S10-1

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

2) Responsibility accounting performance reports compare plans (budgets) with actual results in each responsibility center.

Diff: 1

LO: 10-1

EOC: S10-1

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

3) Goal congruence is a system that evaluates the performance of each responsibility center and its manager.

Diff: 1

LO: 10-1

EOC: S10-1

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

4) A profit center is the responsibility center that is only responsible for costs.

Diff: 1

LO: 10-1

EOC: S10-1

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

5) A product line is generally considered a profit center.

Diff: 1

LO: 10-1

EOC: S10-1

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

6) An investment center is generally a large division of a corporation.

Diff: 1

LO: 10-1

EOC: S10-1

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

7) Management by exception directs management's attention to a large variance between an actual and budget amount in a performance report.

Diff: 1

LO: 10-1

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

8) An example of management by exception occurs when a manager investigates a large variance in a performance report to assign responsibility.

Diff: 1

LO: 10-1

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

9) Small companies tend to use decentralized decision making.

Diff: 1

LO: 10-1

EOC: S10-3

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

10) Companies that decentralize split their operations into different operating segments.

Diff: 1

LO: 10-1

EOC: S10-3

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

11) Decentralization allows top management to concentrate on long-term strategic planning.

Diff: 1

LO: 10-1

EOC: S10-3

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

12) Decentralization allows top management to hire workers with expert knowledge in each business unit.

Diff: 1

LO: 10-1

EOC: S10-3

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

13) Decentralization may duplicate a company's costs because each business unit can contain its own purchasing department.

Diff: 1

LO: 10-1

EOC: S10-3

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

14) Decentralized companies often struggle to achieve goal congruence in an organization.

Diff: 1

LO: 10-1

EOC: S10-3

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

15) Potential duplication of costs is a disadvantage of decentralized organizations.

Diff: 1

LO: 10-1

EOC: S10-3

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

16) The accounting department in a convenience store chain is likely classified as a cost center.

Diff: 1

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

17) The local Burger King restaurant is likely classified as a revenue center.

Diff: 1

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

18) Goal congruence is more likely to occur at a centralized organization rather than a decentralized organization.

Diff: 1

LO: 10-1

EOC: S10-3

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

19) In a(n) ________ center, managers are accountable to both revenues and costs.

A) cost

B) profit

C) equity

D) investment

Diff: 1

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

20) All of the following are responsibility centers except

A) cost center.

B) profit center.

C) investment center.

D) equity center.

Diff: 1

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

21) A manager is only accountable for expenses in a(n) ________ center.

A) cost

B) revenue

C) profit

D) investment

Diff: 1

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

22) To evaluate the performance of a(n) ________, a top manager is responsible for revenues, costs, and the efficient use of the assets invested in the division.

A) cost center

B) investment center

C) profit center

D) revenue center

Diff: 1

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

23) Management by ________ is the practice that directs executive attention to large budget variances.

A) control

B) objective

C) exception

D) analysis

Diff: 1

LO: 10-1

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

24) Which term below best fits "a part, segment, or subunit of a company whose manager is accountable for specified activities"?

A) Operating budget

B) Master budget

C) Sensitivity analysis

D) Responsibility center

Diff: 1

LO: 10-1

EOC: S10-1

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

25) The human resources department for Kohl's Department Stores may be classified as a(n)

A) cost center.

B) investment center.

C) profit center.

D) revenue center.

Diff: 1

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

26) Troy Company budgeted $12 million for customer service costs, but actually spent only $10 million. Which of the following statements is the best course of action for management to take in this instance?

A) Management will investigate this $2 million favorable variance to ensure that the cost savings do not reflect skimping on customer service.

B) Because this $2 million variance is favorable, management does not need to investigate further.

C) Management will investigate this $2 million unfavorable variance to try to identify and correct the problem.

D) Management should not investigate every major variance, especially an unfavorable variance.

Diff: 2

LO: 10-1

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

27) Which of the following is a disadvantage of decentralization that occurs when the organization struggles to achieve goal congruence?

A) Unit managers may not understand the big picture of the company.

B) Management does not have time to concentrate on long-term strategic planning.

C) Unit managers have decreased motivation and retention.

D) Managers receive training and experience to allow advancement in the organization.

Diff: 1

LO: 10-1

EOC: S10-3

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

28) The maintenance department that focuses on efficiency at Continental Airlines may be classified as a(n)

A) cost center.

B) investment center.

C) profit center.

D) revenue center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

29) The security department that is evaluated on its ability to control costs when the company compares actual costs to budget costs at a department store chain may be classified as a(n)

A) cost center.

B) investment center.

C) profit center.

D) revenue center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

30) Lubrizol is a large chemical company that specializes in producing lubricants. Lubrizol was acquired in 2011 for $9 billion by investment holding company Berkshire Hathaway. Lubrizol may be classified as a(n)

A) cost center.

B) investment center.

C) profit center.

D) revenue center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

31) The reservations department that has self-contained sales operations at a car rental chain may be classified as a(n)

A) cost center.

B) investment center.

C) profit center.

D) revenue center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

32) The convenience store that is responsible for its own revenues, costs, and is owned by a national convenience store chain may be classified as a(n)

A) cost center.

B) investment center.

C) revenue center.

D) profit center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

33) An amusement park's games department which reports revenues and expenses may be classified as a(n)

A) profit center.

B) investment center.

C) cost center.

D) revenue center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

34) The human resources department for a steel manufacturer may be classified as a(n)

A) investment center.

B) cost center.

C) profit center.

D) revenue center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

35) A potential disadvantage of decentralization is which of the following?

A) Benchmarking

B) Provides training

C) Provides feedback

D) Duplication of costs

Diff: 1

LO: 10-1

EOC: S10-3

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

36) All of the following are potential advantages of decentralization except

A) Frees top management's time.

B) Encourages use of expert knowledge.

C) Potential duplication of costs.

D) Provides training.

Diff: 1

LO: 10-1

EOC: S10-3

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

37) Frito-Lay, a stand-alone division of PepsiCo, may be classified as a(n)

A) investment center.

B) cost center.

C) profit center.

D) revenue center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

38) Pizza Hut, a stand-alone division of Yum! Brands, may be classified as a(n)

A) cost center.

B) investment center.

C) profit center.

D) revenue center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

39) The production line at Morningstar Farms may be classified as a(n)

A) investment center.

B) cost center.

C) profit center.

D) revenue center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

40) Frito-Lay's Casa Grande plant that controls expenses using lean thinking to eliminate waste may be classified as a(n)

A) cost center.

B) investment center.

C) profit center.

D) revenue center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

41) Sales territories, such as geographic areas within the country, may be classified as a(n)

A) cost center.

B) investment center.

C) revenue center.

D) profit center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

42) The regional sales department for Xerox copiers may be classified as a(n)

A) cost center.

B) investment center.

C) profit center.

D) revenue center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

43) The entire product line at PepsiCo (such as the Pepsi Max product line) may be classified as a(n)

A) cost center.

B) profit center.

C) investment center.

D) revenue center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

44) The entire Corn Flakes product line at Kellogg is may be classified as a(n)

A) cost center.

B) investment center.

C) profit center.

D) revenue center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

45) The manager of the Northeast sales region at General Mills may be in charge of a(n)

A) cost center.

B) investment center.

C) revenue center.

D) profit center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

46) The subscription sales manager at The New York Times may be in charge of a(n)

A) cost center.

B) investment center.

C) profit center.

D) revenue center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

47) The manager of the corporate division of Anthropologie, a large retail clothing chain, may be in charge of a(n)

A) investment center.

B) cost center.

C) profit center.

D) revenue center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

48) The CEO of Banana Republic, a large division of The Gap, Inc., may be in charge of a(n)

A) cost center.

B) investment center.

C) profit center.

D) revenue center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

49) The manager of a local CVS drugstore who is accountable for increasing sales and revenue and for controlling costs may be in charge of a(n)

A) cost center.

B) investment center.

C) revenue center.

D) profit center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

50) The store manager at the Dick's Sporting Goods location in Columbus, Ohio, may be in charge of a(n)

A) cost center.

B) investment center.

C) profit center.

D) revenue center.

Diff: 2

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

51) The manager of the accounting department that may be evaluated on his or her ability to control expenses at Adidas may be in charge of a(n)

A) investment center.

B) cost center.

C) profit center.

D) revenue center.

Diff: 1

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

52) The manager of the truck maintenance department at FedEx may be in charge of a(n)

A) cost center.

B) investment center.

C) profit center.

D) revenue center.

Diff: 1

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

53) The manager of the Walt Disney World Studios (a corporate division) may be in charge of a(n)

A) investment center.

B) cost center.

C) profit center.

D) revenue center.

Diff: 1

LO: 10-1

EOC: E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

54) Describe the four types of responsibility centers. Give a specific example of each of the four types of responsibility centers.

Diff: 2

LO: 10-1

EOC: S10-1; E10-29B

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

55) List and describe reasons why a company might choose to decentralize its operations.

Diff: 1

LO: 10-1

EOC: S10-3

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

56) Discuss potential problems and disadvantages to an organization that decentralizes its operations.

Diff: 1

LO: 10-1

EOC: S10-3

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

10.2 Develop performance reports

1) The performance reports of cost centers only include those costs incurred within each individual cost center.

Diff: 1

LO: 10-2

EOC: E1-18

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

2) A performance report compares expected revenues and expenses against budgeted figures for each responsibility center that the manager evaluates in an organization.

Diff: 1

LO: 10-2

EOC: E10-17A

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

3) The difference between actual results and budget results is known as decentralization.

Diff: 1

LO: 10-2

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

4) Management by exception is used to determine which large variances to investigate.

Diff: 1

LO: 10-2

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

5) Revenue center performance reports are reports that list the variances between actual sales and budgeted sales.

Diff: 1

LO: 10-2

EOC: E10-17A

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

6) Management by exception saves management time because managers in revenue centers only focus on unfavorable variances.

Diff: 1

LO: 10-2

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

7) A segment margin is the operating income generated by a profit or investment center before subtracting common allocated fixed costs to the center.

Diff: 1

LO: 10-2

EOC: E10-17A; E10-18A

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

8) All favorable variances are investigated when using management by exception.

Diff: 1

LO: 10-2

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

9) A favorable variance causes operating income to be higher than budgeted.

Diff: 1

LO: 10-2

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

10) An unfavorable variance causes operating income to be higher than budgeted.

Diff: 1

LO: 10-2

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

11) Which type of variance causes operating income to be lower than the budgeted operating income?

A) Favorable variance

B) Neutral variance

C) Unfavorable variance

D) Reverse variance

Diff: 1

LO: 10-2

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

12) Which type of variance causes operating income to be greater than the budgeted operating income?

A) Favorable variance

B) Neutral variance

C) Unfavorable variance

D) Reverse variance

Diff: 1

LO: 10-2

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

13) A favorable variance causes operating income to be ________ the budgeted operating income?

A) lower than

B) equal to

C) greater than

D) half as much as

Diff: 1

LO: 10-2

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

14) An unfavorable variance causes operating income to be ________ the budgeted operating income?

A) lower than

B) equal to

C) greater than

D) half as much as

Diff: 1

LO: 10-2

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

15) A performance report compares actual revenue and expenses with ________ revenues and expenses.

A) budgeted

B) last year's

C) next year's

D) another company's

Diff: 1

LO: 10-2

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

16) Management by exception would dictate that the manager investigates which of the following variances?

A) Variances which are less than budget and actual dollar amount or percentage

B) Variances which are greater than a budget and actual dollar amount or percentage

C) All unfavorable variances

D) All favorable and unfavorable variances

Diff: 1

LO: 10-2

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

17) A performance report of a(n) ________ will only include revenues generated by the center.

A) revenue center

B) cost center

C) investment center

D) profit center

Diff: 1

LO: 10-2

EOC: E10-17A

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

18) With ________, managers look at the size of the variances between actual results and budgeted amounts to determine which variances a manager should investigate.

A) management by variance

B) management by budget

C) management by decision

D) management by exception

Diff: 1

LO: 10-2

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

19) Which of the following is the operating income an investment center generates before subtracting common fixed costs that are allocated to the center?

A) Sales volume variance

B) Segment margin

C) Return on investment (ROI)

D) Return on assets (ROA)

Diff: 1

LO: 10-2

EOC: E10-17A

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

20) The performance evaluation of a profit center is typically based on its

A) segment margin.

B) static budget variance.

C) return on investment.

D) return on assets.

Diff: 1

LO: 10-2

EOC: E10-17A

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting.

10.3 Calculate ROI, Sales Margin, and Capital Turnover

1) The duties of an investment center manager are similar to those of a CFO of an entire company.

Diff: 1

LO: 10-3

EOC: S10-1

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

2) The duties of an investment center manager are similar to those of a CEO.

Diff: 1

LO: 10-3

EOC: S10-1

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

3) Companies evaluate investment center performance the way they evaluate profit center performance.

Diff: 1

LO: 10-3

EOC: S10-1

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

4) Return on Investment (ROI) is defined as operating income divided by current assets.

Diff: 1

LO: 10-3

EOC: S10-7

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

5) Return on Investment (ROI) is defined as operating income divided by total assets.

Diff: 1

LO: 10-3

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

6) The capital turnover is operating income divided by sales.

Diff: 1

LO: 10-3

EOC: E10-21

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

7) Residual Income (RI) equals operating income less minimum acceptable income.

Diff: 1

LO: 10-3

EOC: S10-9

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

8) Sales margin is a component of the Return on Investment (ROI) calculation.

Diff: 1

LO: 10-3

EOC: E10-23

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

9) The weighted average cost of capital is a component of the Return on Investment (ROI) calculation.

Diff: 1

LO: 10-3

EOC: E10-23

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

10) Total assets is the denominator in the formula managers use to compute ROI.

Diff: 1

LO: 10-3

EOC: S10-7

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

11) Sales margin is defined as operating income divided by sales.

Diff: 1

LO: 10-3

EOC: S10-8

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

12) Capital turnover is defined as operating income divided by total assets.

Diff: 1

LO: 10-3

EOC: E10-23

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

13) The use of return on investment (ROI) as a short-term performance measure may lead managers to reject projects that may be profitable for the company as a whole.

Diff: 1

LO: 10-3

EOC: S10-7

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

14) Residual income is defined as the difference between revenues and expenses.

Diff: 1

LO: 10-3

EOC: S10-9

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

15) What will happen to return on investment (ROI) if current assets decrease while everything else remains the same (assume the current assets decreased is part of operating current assets)?

A) ROI will decrease over time.

B) ROI will increase over time.

C) ROI will not be affected.

D) We cannot determine the direction of the effect from the information provided.

Diff: 2

LO: 10-3

EOC: E10-21

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

16) If selling and administrative expenses decrease while other expenses remain constant, what will happen to return on investment (ROI)?

A) ROI will decrease.

B) ROI will increase.

C) ROI will not be affected.

D) We cannot determine the direction of the effect from the information provided.

Diff: 2

LO: 10-3

EOC: E10-21

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

17) If a company must decrease its sales price of a product while all of the company's expenses remain constant, what will happen to return on investment (ROI)?

A) ROI will decrease.

B) ROI will increase.

C) ROI will not be affected.

D) We cannot determine the effect from the information provided.

Diff: 2

LO: 10-3

EOC: E10-21

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

18) Using ________ may cause a manager to reject a project that may be profitable to the company as a whole.

A) operating income

B) residual income

C) ROI

D) EVA

Diff: 1

LO: 10-3

EOC: E10-21

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

19) A manager can increase return on investment (ROI) by doing which of the following?

A) Increase operating expenses

B) Increase operating assets

C) Decrease sales

D) Decrease operating expenses

Diff: 2

LO: 10-3

EOC: E10-21

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

20) Which of the following financial performance measures can be used to compare potential projects of different sizes?

A) ROI

B) Residual income

C) Sales revenue

D) Operating income

Diff: 1

LO: 10-3

EOC: E10-21

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

21) Assume the Hiking Shoes division of the Simply Shoes Company had the following results last year (in thousands). Management's target rate of return is 20% and the weighted average cost of capital is 25%. Its effective tax rate is 40%.

What is the division's sales margin?

A) 73.33%

B) 52.67%

C) 10%

D) 733.33%

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

22) Assume the Hiking Shoes division of the Simply Shoes Company had the following results last year (in thousands). Management's target rate of return is 20% and the weighted average cost of capital is 30%. Its effective tax rate is 30%.

What is the division's capital turnover?

A) 4.00

B) 3.25

C) 1.23

D) 4.82

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

23) Assume the Hiking Shoes division of the Simply Shoes Company had the following results last year (in thousands). Management's target rate of return is 10% and the weighted average cost of capital is 20%. Its effective tax rate is 30%.

What is the division's Return on Investment (ROI)?

A) 700.00%

B) 20.00%

C) 140.00%

D) 79.00%

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

24) Assume the Hiking Shoes division of the Simply Shoes Company had the following results last year (in thousands). Management's target rate of return is 15% and the weighted average cost of capital is 20%. Its effective tax rate is 30%.

What is the division's Residual Income (RI)?

A) $2,625,000

B) $787,500

C) $4,500,000

D) $2,500,000

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

25) Yale Corporation had the following results last year (in thousands). Management's target rate of return is 20% and the weighted average cost of capital is 15%. Its effective tax rate is 30%.

What is the division's Return on Investment (ROI)?

A) 200.00%

B) 4.00%

C) 50.00%

D) 17.64%

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

26) The Cardstock Manufacturing Division of the Pulp Paper Company reported the following results from the past year. Shareholders require a return of 5%. Management calculated a weighted-average cost of capital (WACC) of 2%. The company's corporate tax rate is 25%.

What is the division's sales margin?

A) 40.00%

B) 63.64%

C) 25.45%

D) 27.27%

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

27) The Cardstock Manufacturing Division of the Pulp Paper Company reported the following results from the past year. Shareholders require a return of 7%. Management calculated a weighted-average cost of capital (WACC) of 6%. The company's corporate tax rate is 25%.

What is the division's capital turnover?

A) 0.50

B) 4.00

C) 8.00

D) 2.40

Diff: 2

LO: 10-3

EOC: E10-21

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

28) The Cardstock Manufacturing Division of the Pulp Paper Company reported the following results from the past year. Shareholders require a return of 8%. Management calculated a weighted-average cost of capital (WACC) of 5%. The company's corporate tax rate is 30%.

What is the division's Return on Investment (ROI)?

A) 15.00%

B) 7.50%

C) 25.00%

D) 50.00%

Diff: 2

LO: 10-3

EOC: E10-21

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

29) The Cardstock Manufacturing Division of the Pulp Paper Company reported the following results from the past year. Shareholders require a return of 8%. Management calculated a weighted-average cost of capital (WACC) of 3%. The company's corporate tax rate is 25%.

What is the division's Residual Income (RI)?

A) $36,000

B) $35,000

C) $101,000

D) $84,000

Diff: 2

LO: 10-3

EOC: E10-21

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

30) The Pizza Division of Frozen Foods Corporation reported the following results from the past year. Shareholders require a return of 11%. Management calculated a weighted-average cost of capital (WACC) of 2%. The company's corporate tax rate is 30%.

What is the division's Residual Income (RI)?

A) $99,000

B) $126,000

C) $38,000

D) $225,000

Diff: 2

LO: 10-3

EOC: E10-21

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

31) Concept Corporation has an ROI of 26%, total assets of $6,500,000, and current liabilities of $900,000. What is the company's operating income?

A) $1,456,000

B) $3,461,538

C) $25,000,000

D) $1,690,000

Diff: 2

LO: 10-3

EOC: E10-22

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

32) Soundside Corporation has operating income of $74,000, a sales margin of 25%, and capital turnover of 1.6. The return on investment (ROI) for Soundside Corporation may be closest to

A) 10%.

B) 40%.

C) 250%.

D) 2%.

Diff: 2

LO: 10-3

EOC: E10-22

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

33) Yesteryear Company has a sales margin of 20%, a target rate of return of 1.4%, and capital turnover of 1.4. Its operating income is $92,000. The sales in dollars for Yesteryear Company may be closest to

A) $460,000.

B) $65,714.

C) $18,400.

D) $128,800.

Diff: 2

LO: 10-3

EOC: E10-22

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

34) Hero Enterprises has operating income of $59,500. Its return on investment (ROI) is 35%, while its target rate of return is 15%. The total assets of Hero Enterprises may be closest to

A) $20,825.

B) $396,667.

C) $170,000.

D) $59,500.

Diff: 2

LO: 10-3

EOC: E10-22

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

35) Succulent Company has a target rate of return of 18%, an ROI of 32%, and capital turnover of 1.6. The sales margin for Succulent Company may be closest to

A) 11%.

B) 20%.

C) 51%.

D) 29%.

Diff: 2

LO: 10-3

EOC: E10-22

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

36) For the most recent year, Honey Company reports operating income of $690,000. Honey's sales margin is 6%, and capital turnover is 1.5.

What is the company's return on investment (ROI)?

A) 4%

B) 6%

C) 1.5%

D) 9%

Diff: 2

LO: 10-3

EOC: E10-22

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

37) Panther Incorporated has operating income of $300,000, a sales margin of 5%, and a capital turnover rate of 2.2. What amount would the company report for sales?

A) $660,000

B) $6,000,000

C) $15,000

D) $136,364

Diff: 2

LO: 10-3

EOC: E10-22

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

38) What are the total assets reported by Lion Enterprises if operating income is $164,500, its return on investment (ROI) is 10%, and its target rate of return is 12%?

A) $16,450

B) $1,645,000

C) $1,370,833

D) $164,500

Diff: 2

LO: 10-3

EOC: E10-22

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

39) ABC Inc's stakeholders require a 7% rate of return. The company currently has an ROI of 26.1% and a capital turnover of 1.8 What is the company's sales margin?

A) 47.0%

B) 3.9%

C) 14.5%

D) 12.6%

Diff: 2

LO: 10-3

EOC: E10-22

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

40) Upscale Corporation has operating income of $370,000, a sales margin of 20%, and capital turnover of 4.0. The return on investment (ROI) for Upscale Corporation may be closest to

A) 5%.

B) 80%.

C) 20%.

D) 200%.

Diff: 2

LO: 10-3

EOC: E10-22

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

41) Tide Company has a sales margin of 20%, operating income of $558,000, and capital turnover of 3.5. The sales in dollars for Tide Company may be closest to

A) $111,600.

B) $159,429.

C) $1,953,000.

D) $2,790,000.

Diff: 2

LO: 10-3

EOC: E10-22

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

42) Charcoal Company has operating income of $450,000. Its return on investment (ROI) is 50%, while its target rate of return is 10%. The total assets of Charcoal Company may be closest to

A) $45,000.

B) $4,500,000.

C) $225,000.

D) $900,000.

Diff: 2

LO: 10-3

EOC: E10-22

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

43) Miles Enterprises has a target rate of return of 11%, an ROI of 35%, and capital turnover of 2.5. The sales margin for Miles Enterprises may be closest to

A) 88%.

B) 14%.

C) 4%.

D) 28%.

Diff: 2

LO: 10-3

EOC: E10-22

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

44) The Suspenders Division of T's Fine Menswear had the following results last year.

Management's target rate of return is 25% and the weighted average cost of capital is 14%.

What is the Suspenders Division's sales margin?

A) 230.00%

B) 34.50%

C) 15.00%

D) 4.35%

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

45) The Suspenders Division of T's Fine Menswear had the following results last year.

Management's target rate of return is 20% and the weighted average cost of capital is 7%.

What is the Suspenders Division's capital turnover?

A) 6.7

B) 4.4

C) 1.5

D) 16.7

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

46) The Suspenders Division of T's Fine Menswear had the following results last year .

Management's target rate of return is 24% and the weighted average cost of capital is 17%.

What is the Suspenders Division's Return on Investment (ROI)?

A) 56.00%

B) 20.00%

C) 280.00%

D) 6.90%

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

47) The Suspenders Division of T's Fine Menswear had the following results last year.

Management's target rate of return is 11% and the weighted average cost of capital is 8%.

What is the Suspenders Division's Residual Income (RI)?

A) $378,000

B) $336,000

C) $580,000

D) $675,000

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

48) The Jet Ski Division of Benton Boat Corporation had the following results last year.

Management's target rate of return is 13% and the weighted average cost of capital is 12%.

What is the Jet Ski Division's Residual Income (RI)?

A) $91,000

B) $507,000

C) $700,000

D) $193,000

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

49) Bookworks Publishing reported the following results for its Textbook Division:

Bookworks' target rate of return is 24% and the weighted average cost of capital is 13%. Its effective tax rate is 40%.

What is the Textbook Division's sales margin?

A) 230.00%

B) 15.00%

C) 34.50%

D) 15.22%

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

50) Bookworks Publishing reported the following results for its Textbook Division:

Bookworks' target rate of return is 16% and the weighted average cost of capital is 11%. Its effective tax rate is 40%.

What is the Textbook Division's capital turnover?

A) 5.1

B) 5.6

C) 6.7

D) 1.2

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

51) Bookworks Publishing reported the following results for its Textbook Division:

Bookworks' target rate of return is 22% and the weighted average cost of capital is 8%. Its effective tax rate is 25%.

What is the Textbook Division's Return on Investment (ROI)?

A) 20.00%

B) 44.09%

C) 40.00%

D) 200.00%

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

52) Bookworks Publishing reported the following results for its Textbook Division:

Bookworks' target rate of return is 13% and the weighted average cost of capital is 11%. Its effective tax rate is 35%.

What is the Textbook Division's Residual Income (RI)?

A) $430,000

B) $260,000

C) $726,000

D) $220,000

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

53) Bling Jewelry reported the following results for its Engagement Ring Division:

Bling's target rate of return is 12% and the weighted average cost of capital is 5%.

What is the Engagement Ring Division's Return on Investment (ROI)?

A) 17.00%

B) 40.00%

C) 18.18%

D) 2.50%

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

54) Selected financial data for the Ceramic Coffee Mug Division is as follows:

What is the Ceramic Coffee Mug Division sales margin?

A) 62.50%

B) 25.00%

C) 250.00%

D) 8.82%

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

55) Selected financial data for the Ceramic Coffee Mug Division is as follows:

What is the Ceramic Coffee Mug Division capital turnover?

A) 5.0

B) 11.2

C) 3.8

D) 1.3

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

56) Selected financial data for the Ceramic Coffee Mug Division is as follows:

What is the Ceramic Coffee Mug Division return on investment?

A) 57.60%

B) 320.00%

C) 18.00%

D) 4.78%

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

57) Selected financial data for the Ceramic Coffee Mug Division is as follows:

What is the Ceramic Coffee Mug Division residual income?

A) $697,500

B) $97,500

C) $510,000

D) $502,500

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

58) The following data relates to Titan Electric and its Light Bulb Division.

What is the Light Bulb Division's sales margin?

A) 250.00%

B) 10.00%

C) 18.00%

D) 25.00%

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

59) The following data relates to Titan Electric and its Light Bulb Division.

What is the Light Bulb Division's capital turnover?

A) 16.7

B) 4.9

C) 3.4

D) 4.5

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

60) The following data relates to Titan Electric and its Light Bulb Division.

What is the Light Bulb Division's Return on Investment (ROI)?

A) 25.00%

B) 10.00%

C) 250.00%

D) 17.67%

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

61) The following data relates to Titan Electric and its Light Bulb Division.

What is the Light Bulb Division's Residual Income (RI)?

A) $288,000

B) $280,000

C) $560,000

D) $160,000

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

62) The following data relates to Polar Corporation and its Arctic Division.

What is the Arctic Division's Residual Income (RI)?

A) $357,500

B) $780,000

C) $162,500

D) $422,500

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

63) The Bedding Division of Homestore Corporation had sales of $6,500,000 and operating income of $2,535,000 last year. The total assets of the Bedding Division were $3,250,000, while current liabilities were $340,000. Homestore Corporation's target rate of return is 17%, while its weighted average cost of capital is 15%. The effective tax rate for the company is 35%.

What is the Bedding Division's sales margin?

A) 32.00%

B) 39.00%

C) 5.23%

D) 78.00%

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

64) The Bedding Division of Homestore Corporation had sales of $8,500,000 and operating income of $2,295,000 last year. The total assets of the Bedding Division were $4,465,000, while current liabilities were $330,000. Homestore Corporation's target rate of return is 10%, while its weighted average cost of capital is 5%. The effective tax rate for the company is 45%.

What is the Bedding Division's capital turnover?

A) 3.7

B) 13.5

C) 25.8

D) 1.9

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

65) The Bedding Division of Homestore Corporation had sales of $9,000,000 and operating income of $1,620,000 last year. The total assets of the Bedding Division were $2,500,000, while current liabilities were $310,000. Homestore Corporation's target rate of return is 12%, while its weighted average cost of capital is 8%. The effective tax rate for the company is 20%.

What is the Bedding Division's Return on Investment (ROI)?

A) 18.00%

B) 3.44%

C) 64.80%

D) 360.00%

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

66) The Bedding Division of Homestore Corporation had sales of $8,500,000 and operating income of $2,295,000 last year. The total assets of the Bedding Division were $4,465,000, while current liabilities were $280,000. Homestore Corporation's target rate of return is 14%, while its weighted average cost of capital is 5%. The effective tax rate for the company is 45%.

What is the Bedding Division's Residual Income (RI)?

A) $1,669,900

B) $1,262,250

C) $2,071,750

D) $625,100

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

67) The West Division of Sunset Corporation had sales of $70,000,000 and operating income of $500,000 last year. The total assets of the West Division were $1,000,000, while current liabilities were $450,000. Sunset Corporation's target rate of return is 14%, while its weighted average cost of capital is 9%. The effective tax rate for the company is 20%.

What is the West Division's Return on Investment (ROI)?

A) 1%

B) 45%

C) 50%

D) 200%

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

68) Selected financial data for the Printer Division of Cole Business Machines is as follows:

What is the Printer Division's sales margin?

A) 160.00%

B) 67.20%

C) 4.85%

D) 42.00%

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

69) Selected financial data for the Printer Division of Cole Business Machines is as follows:

What is the Printer Division's capital turnover?

A) 3.3

B) 2.5

C) 17.9

D) 1.3

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

70) Selected financial data for the Printer Division of Cole Business Machines is as follows:

What is the Printer Division's return on investment?

A) 4.53%

B) 22.00%

C) 66.00%

D) 300.00%

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

71) Selected financial data for the Printer Division of Cole Business Machines is as follows:

What is the Printer Division's residual income?

A) $1,275,000

B) $375,000

C) $2,025,000

D) $1,450,000

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

72) The Paint Division of Colorscape Corporation had sales of $7,200,000 and operating income of $864,000 last year. The total assets of the Paint Division were $3,200,000 while current liabilities were $800,000. The Colorscape Corporation's target rate of return is 13% while its weighted average cost of capital is 9%. The effective tax rate for the company is 45%.

Required:

a. Calculate the sales margin.

b. Calculate the capital turnover.

c. Calculate the return on investment (ROI).

d. Calculate the residual income.

Diff: 3

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

73) The Golf Club Division of Brookgreen Corporation had the following results last year.

Management's target rate of return is 12% and the weighted average cost of capital is 9%. Its effective tax rate is 40%.

Required:

a. Calculate the return on investment (ROI).

b. Calculate the residual income.

Diff: 2

LO: 10-3

EOC: E10-23

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

10.4 Describe strategies and mechanisms for determining a transfer price.

1) Large, diversified companies often will sell products/components from one division to another division rather than purchase from an outside supplier.

Diff: 1

LO: 10-4

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discuss and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards. Define internal controls and list the internal control principles.

2) Transfer cost is the term used to describe the amount one division pays to another division within the same company to purchase a component part.

Diff: 1

LO: 10-4

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discuss and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards. Define internal controls and list the internal control principles.

3) Transfer price is the term used to describe the amount one division pays to another division within the same company to purchase a component part.

Diff: 1

LO: 10-4

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discuss and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards. Define internal controls and list the internal control principles.

4) The price charged for the internal sale of a product between two different divisions of the same company is known as the

A) transfer price.

B) sales price.

C) transfer cost.

D) margin price.

Diff: 1

LO: 10-4

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discuss and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards. Define internal controls and list the internal control principles.

5) The practice of purchasing other companies within one's supply chain which is predicated on the notion that a company's profits can be maximized by owning one's supplier is known as

A) transfer purchasing.

B) supply chain management.

C) vertical integration.

D) profit integration.

Diff: 1

LO: 10-4

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discuss and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards. Define internal controls and list the internal control principles.

6) Which of the strategies listed are used to determine a transfer price?

A) Market price

B) Cost

C) Negotiated price

D) All of the above

Diff: 1

LO: 10-4

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discuss and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards. Define internal controls and list the internal control principles.

7) Which of the following strategies listed is not used to determine a transfer price?

A) Market price

B) Cost

C) Negotiated price

D) Selling price

Diff: 1

LO: 10-4

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discuss and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards. Define internal controls and list the internal control principles.

8) Flash E-Card Manufacturing manufactures software parts for the computer software systems that produce e-cards. The Flash II part is currently manufactured in the Computer Department. The Data Department also produces the part and the plant has excess capacity to produce the Flash II part. The current market price of the Flash II part is $1400. The managerial accountant reported the following manufacturing costs and variable expense data:

Flash E-Card Manufacturing

Manufacturing Costs and Variable Expense Report

Flash Component

If the highest acceptable transfer price is $1400 in the market, what is the lowest acceptable in-house price the Data Department should receive to produce the part in-house at the Computer Department?

A) $1400

B) $810

C) $1000

D) $1120

Diff: 2

LO: 10-4

EOC: S10-10

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discuss and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards. Define internal controls and list the internal control principles.

9) Boat Hull Manufacturing produces boat parts at the manufacturing facility in Virginia. The managerial accountant reported that Boat Hull Manufacturing manufactures parts to repair the container ships that import products from China. The main part that Boat Hull Manufacturing produces is the T24 part. The Port Department produces the T24 part at the Boat Hull Manufacturing facility in Virginia. The managerial accountant reported that the Deport Department could also produce the T24 part because there is excess capacity at the facility. The managerial accountant reported the current market price of the T24 part is $1300 and reported the following manufacturing cost and expenses data:

Boat Hull Manufacturing

Manufacturing Costs and Variable Expense Report

T24 Part

What is the highest transfer price the selling division would receive, and the buying division would pay, for the T24 part?

A) $865

B) $1300

C) $1184

D) $1004

Diff: 2

LO: 10-4

EOC: S10-10

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discuss and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards. Define internal controls and list the internal control principles.

10) Hill Manufacturing is a large manufacturer that produces a part that inserts into diesel engines. The company has several large divisions and the managerial accountant reported the part is currently produced in the assembly department. The managerial accountant reported that the variable selling expenses and manufacturing costs related to the production of this part include the following:

Hill Manufacturing

Manufacturing Costs and Variable Selling Expenses

Part Production Report

Another department at Hill Manufacturing is set up to produce the diesel part and could produce the part internally rather than purchase the part from an outside supplier. The managerial accountant reported that the other department has excess capacity and could produce the part in that department. There is a significant amount of competition in the marketplace and the current price to produce the part at the other internal department and a competitor is $1,500.

What is the highest transfer price that the managerial accountant should pay to purchase the part from a competitor? Calculate the lowest acceptable transfer price if the part was produced by the internal operations at the other department at Hill Manufacturing.

Diff: 2

LO: 10-4

EOC: S10-10

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discuss and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards. Define internal controls and list the internal control principles.

11) Marble Countertops and Cabinet Manufacturing produces marble inserts to accommodate the marble countertops. The Marble Division can use the MAR1 insert that is manufactured in the company's Cabinet Division because there is excess capacity. The standard market price to produce the MAR1 insert is $1,400. The managerial accountant reported the following manufacturing cost and variable expense information:

Marble Countertops and Cabinet Manufacturing

Manufacturing Costs and Variable Expense Report

MAR1 Insert

What is the highest price that Marble Countertops and Cabinet Manufacturing should pay in the outside market? What is the lowest acceptable transfer price to the Cabinet Division? What would happen if the managerial accountant produced the part below the acceptable transfer price?

Diff: 2

LO: 10-4

EOC: S10-10

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discuss and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards. Define internal controls and list the internal control principles.

12) Shining Springs Glass Art manufactures various glass art fixtures, including a dolphin-glass figurine. The dolphin-glass figurine is produced in the Design Department and it uses a glass insert that is produced also in the Production Department. The market price for the glass insert is $900. The plant has excess capacity and the managerial accountant reported the following information:

Shining Springs Glass Art

Manufacturing Costs and Variable Expense Report

Produced Glass Report

What is the lowest acceptable in-house transfer price to the Production Department? What is the highest acceptable transfer price the Design Department should pay the Production Department to produce the insert in-house?? What should the managerial accountant understand if there was not access capacity at the plant to produce the insert?

Diff: 2

LO: 10-4

EOC: S10-10

AACSB: Analytical thinking

Learning Outcome: Discuss responsibility accounting. Discuss and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards. Define internal controls and list the internal control principles.

10.5 Prepare and evaluate flexible budget Performance reports

1) A flexible budget is a budget prepared for multiple volume levels.

Diff: 1

LO: 10-5

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

2) A flexible budget is a budget prepared for a different level of volume than that which was originally anticipated.

Diff: 1

LO: 10-5

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

3) Another name for a static budget is a flexible budget.

Diff: 1

LO: 10-5

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

4) In a flexible budget, total fixed costs do not change as production volume changes.

Diff: 1

LO: 10-5

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

5) The flexible budget total cost formula applies only to a specific relevant range.

Diff: 1

LO: 10-5

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

6) Flexible budgets are budgets that summarize cost and revenue information for a single volume level.

Diff: 1

LO: 10-5

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

7) Both the static budget and the flexible budget used for performance evaluation are developed before the period of actual production.

Diff: 1

LO: 10-5

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

8) The master budget variance is the difference between actual results and the static budget.

Diff: 1

LO: 10-5

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

9) The volume variance is the difference between actual results and the flexible budget.

Diff: 1

LO: 10-5

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

10) The flexible budget variance is the difference between actual results and the flexible budget.

Diff: 1

LO: 10-5

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

11) The difference between the actual revenues and expenses and the master budget is known as a

A) capital budget variance.

B) flexible budget variance.

C) static budget variance.

D) master budget variance.

Diff: 1

LO: 10-5

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

12) The ________ is the optimum budget to managers that plan revenues and expenses at different sales volumes.

A) flexible budget

B) capital budget

C) static budget

D) master budget

Diff: 1

LO: 10-5

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

13) With regard to a static budget instead of a flexible budget, which of the following is true?

A) A static budget is adjusted for changes in the level of sales activity.

B) A static budget is a budget that stays the same from one period to the next.

C) A static budget is prepared for only one level of sales activity.

D) A static budget is also known as a fixed budget.

Diff: 1

LO: 10-5

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

14) The ________ is a budget based on multiple levels of projected sales or production.

A) standard budget

B) flexible budget

C) static budget

D) fixed budget

Diff: 1

LO: 10-5

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

15) With regard to flexible budgets, which of the following statements is true?

A) They are prepared for one level of sales volume.

B) Managers use them to help plan for uncertainties.

C) They are prepared by the accounting department on an annual basis.

D) They are designed to estimate revenues only.

Diff: 1

LO: 10-5

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

16) The ________reveals whether or not additional sales revenue can offset an increase in costs in the flexible budget performance report.

A) flexible budget variance

B) static budget variance

C) sales volume variance

D) actual variance

Diff: 2

LO: 10-5

EOC: S10-14

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

17) Which of the following causes the master budget variance between the amounts in the master budget and the flexible budget of a revenue center?

A) The cost of sales

B) The number of units sold differs from planned sales levels

C) The selling price per unit

D) Both the selling price and the number of units sold

Diff: 2

LO: 10-5

EOC: E10-17A

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

18) Which of the following may cause a favorable sales volume variance of the revenues?

A) Actual net income for the subunit is greater than budgeted net income.

B) Actual sales in dollars are greater than the master budget sales in dollars.

C) The flexible budget sales in dollars are greater than the static budget sales in dollars.

D) Actual sales in dollars are less than the static budget sales in dollars.

Diff: 2

LO: 10-5

EOC: E10-17A

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

19) Which of the following statements is not true?

A) The volume variance for fixed cost will always be zero.

B) The flexible budget variance is the comparison of actual results to the flexible budget.

C) The flexible budget variance for fixed costs will always be zero.

D) When a flexible budget is used in a performance report, it is prepared for the actual level of units sold.

Diff: 2

LO: 10-5

AACSB: Reflective thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

20) A favorable volume variance for sales revenue would indicate that

A) fewer units were actually sold than the company had anticipated.

B) the expenses of the company were less than what they had planned.

C) more units were actually sold than the company had originally budgeted to sell.

D) actual sales revenue was higher than the flexible budget sales revenue.

Diff: 2

LO: 10-5

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

21) An unfavorable volume variance for variable expenses would indicate that

A) fewer units were actually sold than the company had anticipated.

B) the expenses of the company were less than what they had planned.

C) more units were actually sold than the company had originally budgeted to sell.

D) actual variable expenses were higher than the flexible budget variable expenses.

Diff: 2

LO: 10-5

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

22) An unfavorable flexible budget variance for variable expenses would indicate that

A) fewer units were actually sold than the company had anticipated.

B) the expenses of the company were less than what they had planned.

C) more units were actually sold than the company had originally budgeted to sell.

D) actual variable expenses were higher than the flexible budget variable expenses.

Diff: 2

LO: 10-5

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

23) A favorable flexible budget variance for variable expenses would indicate that

A) fewer units were actually sold than the company had anticipated.

B) actual variable expenses of the company were less than the flexible budget variable expenses.

C) more units were actually sold than the company had originally budgeted to sell.

D) actual variable expenses were higher than the flexible budget variable expenses.

Diff: 2

LO: 10-5

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

24) Summer Nights sells bottles of bug spray for $6.50 each. Variable costs are $3.25 per bottle, while fixed costs are $42,000 per month for volumes up to 40,000 bottles of spray and $60,000 per month for volumes above 40,000 bottles of spray. The flexible budget would reflect monthly operating income for 20,000 bottles of spray and 34,000 bottles of spray of what dollar amounts?

A) $88,000 and $68,500, respectively

B) $23,000 and $68,500, respectively

C) $130,000 and $221,000, respectively

D) $5000 and $161,000, respectively

Diff: 2

LO: 10-5

EOC: E10-26

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

25) A graph of a flexible budget formula reflects fixed costs of $47,000 per month and total costs of $92,000 at a volume of 3000 units. Assuming the relevant range is 1,000 to 20,000 units, the graph would reflect total monthly costs at 11,000 units of what dollar amount?

A) $212,000

B) $92,000

C) $304,000

D) $165,000

Diff: 2

LO: 10-5

EOC: E10-26

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

26) Safe Dog Company makes dog crates. The budgeted selling price is $30 per crate, the variable rate is $5 per crate and budgeted fixed costs are $20,000 per month. What is the budgeted operating income for 2900 crates sold in a month?

A) $34,500

B) $72,500

C) $52,500

D) $87,000

Diff: 2

LO: 10-5

EOC: E10-26

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

27) Cargo Corporation sells its cargo carriers for $600 each. Its variable cost is $200 per carrier. Fixed costs are $23,000 per month for volumes up to 1000 carriers. Above 1000 carriers, monthly fixed costs are $59,000. What is the budgeted operating income at a level of 800 carriers per month?

A) $297,000

B) $320,000

C) $457,000

D) $261,000

Diff: 2

LO: 10-5

EOC: E10-26

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

28) Cargo Corporation sells its cargo carriers for $700 each. Its variable cost is $400 per carrier. Fixed costs are $31,000 per month for volumes up to 1100 carriers. Above 1100 carriers, monthly fixed costs are $54,000. What is the budgeted operating income at a level of 2600 carriers per month?

A) $780,000

B) $1,766,000

C) $726,000

D) $749,000

Diff: 2

LO: 10-5

EOC: E10-26

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

29) Calculated Concepts makes calculators for business applications. The budgeted selling price is $110 per calculator, the variable rate is $93 per calculator and budgeted fixed costs are $180,000 per month. What is the budgeted operating income for 15,000 calculators sold in a month?

A) $255,000

B) $1,575,000

C) $1,650,000

D) $75,000

Diff: 2

LO: 10-5

EOC: E10-26

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

30) Tunes Corporation manufactures and sells portable radios. The radio sells for $40 per unit and its variable costs per unit are $10. Fixed costs are $60,000 per month for sales volumes up to 27,000 radios. If more than 27,000 radios are sold, the fixed costs will be $63,000. The flexible budget would reflect what monthly operating income for a sales volume of 50,000 radios?

A) $63,000

B) $1,437,000

C) $2,000,000

D) $1,500,000

Diff: 2

LO: 10-5

EOC: E10-26

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

31) Soundbar Inc sells its computer speakers for $105 per set. Its variable cost is $60 per set of speakers. Fixed costs are $55,000 per month for volumes up to 2800 sets of speakers. Above 2800 sets, monthly fixed costs are $116,000. What is the budgeted operating income (loss) at a sales level of 1700 sets of speakers per month?

A) Operating loss of $39,500

B) Operating income of $76,500

C) Operating income of $21,500

D) Operating income of $123,500

Diff: 2

LO: 10-5

EOC: E10-26

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

32) Soundbar Inc sells its computer speakers for $100 per set. Its variable cost is $60 per set of speakers. Fixed costs are $60,000 per month for volumes up to 2000 sets of speakers. Above 2000 sets, monthly fixed costs are $149,000. What is the budgeted operating income (loss) at a sales level of 3200 sets of speakers per month?

A) Operating loss of $21,000

B) Operating income of $128,000

C) Operating income of $68,000

D) Operating income of $171,000

Diff: 2

LO: 10-5

EOC: E10-26

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

33) Affordable Smiles mobile dentist office budgeted for 4330 patient visits a year. Affordable Smiles actually saw 4470 patients during the year and they have provided the following data:

Based on the given information, what is the volume variance for personnel expenses?

A) $2000 Unfavorable

B) $0

C) $2000 Favorable

D) Cannot be determined

Diff: 2

LO: 10-5

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

34) Affordable Smiles mobile dentist office budgeted for 4320 patient visits a year. Affordable Smiles actually saw 4430 patients during the year and they have provided the following data:

Based on the given information, what is the volume variance for revenue?

A) $110 Favorable

B) $0

C) $7480 Unfavorable

D) $7480 Favorable

Diff: 2

LO: 10-5

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

35) Affordable Smiles mobile dentist office budgeted for 4320 patient visits a year. Affordable Smiles actually saw 4445 patients during the year and they have provided the following data:

Based on the given information, what is the flexible budget variance for personnel expenses?

A) $3000 Unfavorable

B) $0

C) $3000 Favorable

D) Cannot be determined

Diff: 2

LO: 10-5

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

36) Affordable Smiles mobile dentist office budgeted for 4355 patient visits a year. Affordable Smiles actually saw 4500 patients during the year and they have provided the following data:

Based on the given information, what is the flexible budget variance for revenue?

A) $91,300 Unfavorable

B) $10,295 Favorable

C) $10,295 Unfavorable

D) $91,300 Favorable

Diff: 2

LO: 10-5

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

37) Affordable Smiles mobile dentist office budgeted for 4300 patient visits a year. Affordable Smiles actually saw 4400 patients during the year and they have provided the following data:

Based on the given information, what is the flexible budget variance for admin expenses?

A) $650.00 Unfavorable

B) $650.00 Favorable

C) $600.00 Unfavorable

D) $600.00 Favorable

Diff: 2

LO: 10-5

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

38) Brick Builders Corporation provided the following partially completed monthly flexible budget. Complete the flexible budget.

Flexible Budget

Flexible Budget for Various Levels of Volume

Formula per Unit

Diff: 2

LO: 10-5

EOC: E10-26

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

39) Winthrup Corporation sells a unit of its product for $12.00, resulting in a contribution margin of $7.00 per unit. Fixed costs are budgeted at $50,000 per quarter for volumes up to 12,000 units and $80,000 for volumes exceeding 12,000 units.

Prepare the flexible budget for the next quarter for volume levels of 11,000, 13,000, and 16,000 units.

Diff: 2

LO: 10-5

EOC: E10-26

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

40) A company's flexible budget for 93,000 units of production showed sales of $300,000; variable costs of $150,000; and fixed costs of $90,000. What net operating income would you expect the company to earn if it produces and sells 98,000 units? (Assume 98,000 units is in the relevant range.)

Diff: 2

LO: 10-5

EOC: E10-26

AACSB: Analytical thinking

Learning Outcome: Prepare a flexible budget and discuss the interpretation and use of flexible budgets.

10.6 Describe the balanced scorecard and identify KPIs for each perspective

1) The balanced scorecard considers only financial performance measures.

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

2) Financial performance measures are known as lag indicators. A lag indicator is a performance measure that predicts future performance.

Diff: 1

LO: 10-6

EOC: E10-29

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

3) Customer satisfaction, operational efficiency, employee excellence, and financial profitability are often measured as critical factors in the balanced scorecard approach.

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

4) The ultimate purpose of the balanced scorecard is to give management a balanced, comprehensive view of the company's performance.

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

5) KPI in the Balanced Scorecard stands for Knowledge Profitability Index.

Diff: 1

LO: 10-6

EOC: S10-13

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

6) Operations is one factor of the financial perspective of the Balanced Scorecard.

Diff: 1

LO: 10-6

EOC: S10-13

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

7) All four perspectives must always be included on each individual company's balanced scorecard.

Diff: 1

LO: 10-6

EOC: S10-13

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

8) The four perspectives of the balanced scorecard include all of the following except

A) financial.

B) customer.

C) cost.

D) learning and growth.

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

9) The number of on-time deliveries may be an example of measuring which perspective of the balanced scorecard?

A) Customer

B) Financial

C) Internal business

D) Learning and growth

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

10) Employee satisfaction would be an example of measuring which perspective of the balanced scorecard?

A) Financial

B) Customer

C) Learning and growth

D) Internal business

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

11) The number of repeat customers may be an example of measuring which perspective of the balanced scorecard?

A) Customer

B) Financial

C) Internal business

D) Learning and growth

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

12) The number of new services offered during the period may be an example of measuring which perspective of the balanced scorecard?

A) Financial

B) Customer

C) Internal business

D) Learning and growth

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

13) Company sales revenue growth rates (compared to industry sales revenue growth rates) may be an example of measuring which perspective of the balanced scorecard?

A) Financial

B) Customer

C) Internal business

D) Learning and growth

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

14) The number of rework units may be an example of measuring which perspective of the balanced scorecard?

A) Financial

B) Customer

C) Internal business

D) Learning and growth

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

15) The results of a customer survey about customer experiences with the company's services may be an example of measuring which perspective of the balanced scorecard?

A) Financial

B) Customer

C) Internal business

D) Learning and growth

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

16) Total hours of continuing professional education taken by employees may be an example of measuring which perspective of the balanced scorecard?

A) Financial

B) Customer

C) Internal business

D) Learning and growth

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

17) The number of new products developed may be an example of measuring which perspective of the balanced scorecard?

A) Financial

B) Customer

C) Learning and growth

D) Internal business

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

18) The percentage of market share may be an example of measuring which perspective of the balanced scorecard?

A) Financial

B) Internal business

C) Customer

D) Learning and growth

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

19) The percentage of products with schematics and detailed operating instructions available within the company's information system for use by customer service representatives may be an example of measuring which perspective of the balanced scorecard?

A) Financial

B) Customer

C) Learning and growth

D) Internal business

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

20) The number of defects found during the manufacturing process may be an example of measuring which perspective of the balanced scorecard?

A) Internal business

B) Customer

C) Financial

D) Learning and growth

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

21) The ________ approach recognizes that both financial and operational performance measures should be considered when evaluating company performance.

A) financial and operational

B) total

C) complete

D) balanced scorecard

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

22) The ________ perspective of the balanced scorecard helps managers answer the question, "How do we look to shareholders?"

A) financial

B) internal business

C) customer

D) learning and growth

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

23) The ________ of the balanced scorecard focuses on continuing to improve and create value.

A) internal business perspective

B) learning and growth perspective

C) customer perspective

D) financial perspective

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

24) The ________ of the balanced scorecard focuses on determining if customers are satisfied.

A) internal business perspective

B) learning and growth perspective

C) customer perspective

D) financial perspective

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

25) The ________ of the balanced scorecard focuses on how to determine the company's "climate for action."

A) internal business perspective

B) learning and growth perspective

C) customer perspective

D) financial perspective

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

26) Return on investment and revenue growth may be examples of

A) internal business perspective.

B) customer perspective.

C) financial perspective.

D) learning and growth perspective.

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

27) The number of employee suggestions implemented and percentage of the sales force with access to real-time inventory levels may be examples of the

A) financial perspective.

B) learning and growth perspective.

C) internal business perspective.

D) customer perspective.

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

28) The number of warranty claims may be an example of the

A) financial perspective.

B) customer perspective.

C) learning and growth perspective.

D) internal business perspective.

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

29) Customer satisfaction ratings may be an example of the

A) customer perspective.

B) financial perspective.

C) internal business perspective.

D) learning and growth perspective.

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

30) Cash flows from operations and gross margin growth may be examples of the

A) customer perspective.

B) financial perspective.

C) internal business perspective.

D) learning and growth perspective.

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

31) New product development time may be an example of the

A) financial perspective.

B) customer perspective.

C) learning and growth perspective.

D) internal business perspective.

Diff: 1

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

32) List the four areas of a balanced scorecard. Describe each area. Define "key performance indicator" (KPI). Give an example of a KPI in each balanced scorecard perspective.

Diff: 2

LO: 10-6

EOC: E10-30

AACSB: Reflective thinking

Learning Outcome: Discuss responsibility accounting. Discus and calculate various performance measures used by management such as ROI, residual income, and balanced scorecards.

10.7 Analyze financial performance using data analytics tools

1) The ABS function in Excel will return a sum of whatever cells referenced.

Diff: 1

LO: 10-7

AACSB: Reflective thinking

2) The ABS function in Excel will return an absolute value of the referenced cell or formula.

Diff: 1

LO: 10-7

AACSB: Reflective thinking

3) When calculating variances in Excel, the managers should prepare a report with absolute values and use the IF function to determine whether the variance is favorable or unfavorable.

Diff: 1

LO: 10-7

AACSB: Reflective thinking

4) The ABS function can only return the absolute value of a referenced cell, not an absolute value of arithmetic operations.

Diff: 1

LO: 10-7

AACSB: Reflective thinking

5) Based on the following, what would you enter into cell D3 to return an absolute value for the office supplies variance?

A) =ABS(D3)

B) =ABS(D3=B3-C3)

C) =ABS(B3-C3)

D) =ABS(C3+B3)

Diff: 2

LO: 10-7

AACSB: Analytical thinking

6) Based on the following, what would you enter into cell D5 to return an absolute value for the rent variance?

A) =ABS(C5-B5)

B) =ABS(D5=B5*C5)

C) =ABS(B5)

D) =ABS(C5+B5)

Diff: 2

LO: 10-7

AACSB: Analytical thinking

7) The IF function is found in what tab on the Excel ribbon?

A) Insert

B) Data

C) Formulas

D) View

Diff: 1

LO: 10-7

AACSB: Reflective thinking

8) The IF function is found in what function on the Formulas tab in Excel?

A) Financial

B) Logical

C) Text

D) Math & Trig

Diff: 1

LO: 10-7

AACSB: Reflective thinking

9) Based on the following, if the Logical_test argument stated "B>=C3", what would be entered as the "Value_if_true" argument, if F equals favorable and U equals unfavorable?

A) F

B) U

C) =B3-C3

D) Not able to be determined at this time.

Diff: 2

LO: 10-7

AACSB: Analytical thinking

10) Describe how to use the IF function in Excel for the True/False Logic Test when analyzing variances.

Diff: 2

LO: 10-7

AACSB: Reflective thinking