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The residual income for the Hum Division last year was:


A) $126,000
B) $46,000
C) $78,000
D) $22,000

E) A) and B)
F) A) and C)

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Financial measures such as ROI are generally better than nonfinancial measures of key success drivers such as customer satisfaction as leading indicators of future financial performance.

A) True
B) False

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The Casket Division of Saal Corporation had average operating assets of $950,000 and net operating income of $135,200 in January.The company uses residual income to evaluate the performance of its divisions, with a minimum required rate of return of 13%. Required: What was the Casket Division's residual income in January?

Correct Answer

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Beery Inc.reported the following results from last year's operations: Beery Inc.reported the following results from last year's operations: At the beginning of this year, the company has a $900,000 investment opportunity with the following characteristics: The company's minimum required rate of return is 12%.If the company pursues the investment opportunity, this year's combined residual income for the entire company will be closest to: A) $848,700 B) $942,000 C) $24,300 D) $114,000 At the beginning of this year, the company has a $900,000 investment opportunity with the following characteristics: Beery Inc.reported the following results from last year's operations: At the beginning of this year, the company has a $900,000 investment opportunity with the following characteristics: The company's minimum required rate of return is 12%.If the company pursues the investment opportunity, this year's combined residual income for the entire company will be closest to: A) $848,700 B) $942,000 C) $24,300 D) $114,000 The company's minimum required rate of return is 12%.If the company pursues the investment opportunity, this year's combined residual income for the entire company will be closest to:


A) $848,700
B) $942,000
C) $24,300
D) $114,000

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

Correct Answer

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Worsell Inc.reported the following results from last year's operations: Worsell Inc.reported the following results from last year's operations: The company's minimum required rate of return is 10%.Last year's residual income was closest to: A) $440,000 B) $490,000 C) ($638,000) D) ($60,000) The company's minimum required rate of return is 10%.Last year's residual income was closest to:


A) $440,000
B) $490,000
C) ($638,000)
D) ($60,000)

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

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Simkin Corporation keeps careful track of the time required to fill orders.Data concerning a particular order appear below: Simkin Corporation keeps careful track of the time required to fill orders.Data concerning a particular order appear below: The manufacturing cycle efficiency (MCE) was closest to: A) 0.46 B) 0.06 C) 0.20 D) 0.19 The manufacturing cycle efficiency (MCE) was closest to:


A) 0.46
B) 0.06
C) 0.20
D) 0.19

E) C) and D)
F) None of the above

Correct Answer

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The average operating assets for Year 2 were:


A) $1,000,000
B) $1,080,000
C) $1,200,000
D) $1,388,889

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

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Braymiller Inc.has a $1,600,000 investment opportunity with the following characteristics: Braymiller Inc.has a $1,600,000 investment opportunity with the following characteristics: The turnover for this investment opportunity is closest to: A) 0.04 B) 0.40 C) 2.50 D) 25.00 The turnover for this investment opportunity is closest to:


A) 0.04
B) 0.40
C) 2.50
D) 25.00

E) A) and B)
F) A) and C)

Correct Answer

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If the company pursues the investment opportunity, this year's combined residual income for the entire company will be closest to:


A) $776,100
B) ($60,000)
C) $720,000
D) ($17,100)

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

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Which of the following measures of performance encourages continued expansion by an investment center so long as it is able to earn a return in excess of the minimum required return on average operating assets?


A) return on investment
B) transfer pricing
C) the contribution approach
D) residual income

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

Correct Answer

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The throughput time was:


A) 4.6 hours
B) 9.7 hours
C) 20.6 hours
D) 16 hours

E) A) and B)
F) A) and C)

Correct Answer

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ROI and residual income are tools used to evaluate managerial performance in investment centers.

A) True
B) False

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The division's margin is closest to:


A) 31.3%
B) 9.6%
C) 30.7%
D) 40.3%

E) C) and D)
F) A) and D)

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Anguiano Inc.reported the following results from last year's operations: Anguiano Inc.reported the following results from last year's operations: The company's average operating assets were $5,000,000. Last year's return on investment (ROI) was closest to: A) 7.0% B) 14.7% C) 45.8% D) 47.6% The company's average operating assets were $5,000,000. Last year's return on investment (ROI) was closest to:


A) 7.0%
B) 14.7%
C) 45.8%
D) 47.6%

E) None of the above
F) C) and D)

Correct Answer

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Tennill Inc.has a $1,400,000 investment opportunity with the following characteristics: Tennill Inc.has a $1,400,000 investment opportunity with the following characteristics: The ROI for this year's investment opportunity considered alone is closest to: A) 8.1% B) 128.0% C) 3.0% D) 9.6% The ROI for this year's investment opportunity considered alone is closest to:


A) 8.1%
B) 128.0%
C) 3.0%
D) 9.6%

E) A) and B)
F) A) and C)

Correct Answer

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The delivery cycle time was:


A) 30.6 hours
B) 2 hours
C) 29.4 hours
D) 11.1 hours

E) None of the above
F) A) and B)

Correct Answer

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Cirone Inc.reported the following results from last year's operations: Cirone Inc.reported the following results from last year's operations: At the beginning of this year, the company has a $1,200,000 investment opportunity with the following characteristics: If the company pursues the investment opportunity and otherwise performs the same as last year, the combined margin for the entire company will be closest to: A) 3.1% B) 8.4% C) 6.3% D) 12.1% At the beginning of this year, the company has a $1,200,000 investment opportunity with the following characteristics: Cirone Inc.reported the following results from last year's operations: At the beginning of this year, the company has a $1,200,000 investment opportunity with the following characteristics: If the company pursues the investment opportunity and otherwise performs the same as last year, the combined margin for the entire company will be closest to: A) 3.1% B) 8.4% C) 6.3% D) 12.1% If the company pursues the investment opportunity and otherwise performs the same as last year, the combined margin for the entire company will be closest to:


A) 3.1%
B) 8.4%
C) 6.3%
D) 12.1%

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

Correct Answer

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If a company contains a number of investment centers of differing sizes, return on investment (ROI)should be used rather than residual income to rank the financial performance of the divisions.

A) True
B) False

Correct Answer

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An advantage of using ROI to evaluate performance is that it encourages the manager to reduce the investment in operating assets as well as increase net operating income.

A) True
B) False

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Return on investment (ROI)equals margin multiplied by sales.

A) True
B) False

Correct Answer

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