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Exam 10: Decentralized Performance Evaluation

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Question 41

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Florida Inc.has revenues of $1,500,000 resulting in an operating income of $105,000.Average invested assets total $750,000;the cost of capital is 10%.The profit margin is

A) 7%
B) 14%
C) 2.00
D) 0.50

E) C) and D)
F) B) and C)

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Question 42

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Grove Corp.has revenues of $1,500,000 resulting in an operating income of $105,000.Average invested assets total $750,000.If sales increase by 10% and the investment level remains constant,what is the investment turnover?

A) 2.00
B) 2.20
C) 7.0%
D) 7.7%

E) All of the above
F) C) and D)

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Question 43

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Devon Inc.has a profit margin of 12% and an investment turnover of 2.5.Sales revenue is $600,000.What is the operating income?

The hurdle rate is also called economic value added.The hurdle rate is also called the required rate of return,and represents the company's cost of capital.

Swan Company has two divisions,Hill and Paradise.Hill produces a unit that Paradise could use in its production.Paradise currently is purchasing 5,000 units from an outside supplier for $56.Hill is operating at less than full capacity and has variable costs of $30.80 per unit.The full cost to manufacture the unit is $43.40.Hill currently sells 450,000 units at a selling price of $61.60.How much profit will Hill receive from the transfer if a transfer price of $42 is agreed upon?

Holiday Corp.has two divisions,Quail and Marlin.Quail produces a widget that Marlin could use in its production.Quail's variable costs are $4 per widget while the full cost is $7.Widgets sell on the open market for $12 each.If Quail has excess capacity,what would be the cost savings if the transfer was made and Marlin currently is purchasing 100,000 units on the open market?

Profit margin is defined as the ratio of sales revenue to operating income.Profit margin is defined as the ratio of operating income to sales revenue.

Almond,Inc.uses a balanced scorecard.One of the measures on the scorecard is the average age of raw materials inventory.Which balanced scorecard perspective would this measure most likely fit into?

Florida Inc.has revenues of $1,500,000 resulting in an operating income of $105,000.Average invested assets total $750,000;the cost of capital is 10%.The investment turnover is

Palm Inc.has a profit margin of 15% and an investment turnover of 2.Sales revenue is $800,000.What is the amount of average invested assets?

The responsibility center in which the manager has responsibility and authority over only revenues and costs is

Killian Corp.has a residual income of $30,000 on invested assets of $450,000.If the hurdle rate is 10%,what is the operating income?

Tropic Corp.has sales revenue of $500,000 resulting in operating income of $54,000.Average invested assets total $600,000,and the cost of capital is 6%.Calculate the return on investment if sales increase by 10% and the profit margin and invested assets remain the same.

Which of the following is not something that should be compiled for each dimension of the balanced scorecard?

Tiffany Company has two divisions,Gold and Silver.Gold produces a unit that Silver could use in its production.Silver currently is purchasing 50,000 units from an outside supplier for $25.Gold is operating at less than full capacity and has variable costs of $13.50 per unit.The full cost to manufacture the unit is $20.Gold currently sells 450,000 units at a selling price of $27.If an internal transfer is made,variable shipping and administrative costs of $1 per unit could be avoided.How much profit will Gold receive from the transfer if a transfer price of $22.50 is agreed upon?

Holiday Corp.has two divisions,Quail and Marlin.Quail produces a widget that Marlin could use in its production.Quail's variable costs are $4 per widget while the full cost is $7.Widgets sell on the open market for $12 each.If Quail has excess capacity,what would be the maximum transfer price if Marlin currently is purchasing 100,000 units on the open market?

In what type of organization is decision-making authority spread throughout the organization?

The transfer pricing method that uses the price the company would charge external customers is the

Almond,Inc.uses a balanced scorecard.One of the measures on the scorecard is the percentage of revenue from repeat sales.Which balanced scorecard perspective would this measure most likely fit into?

The responsibility center in which the manager has responsibility and authority over revenues,costs and assets is