MA Ch12

If sales and avg oper. assets for Y2 = Y1, yet operating income is higher, Y2 turnover (compared with Y1 turnover) will

• decrease.
• increase.
• stay the same.
• The direction of change in turnover cannot be determined by this info

The key difference between residual income and EVA is that EVA

• uses the actual cost of capital rather than a min. required cost of capital
• uses the min. req. cost of capital rather than the actual % cost of capital
• is a ratio rather than an absolute dollar amount.
• cannot be negative.

If ROI for a division is 15% and the company’s minimum required cost of capital is 18%, then

• residual income for the division is negative
• residual income for the division takes on a value between 0 and +1
• residual income cannot be computed.
• EVA must be negative.

If Div A is operating at full capacity, the max transfer price (the ceiling of the bargaining range) is

• $38.00
• $50.00
• $44
• $47.00

If Div A is operating at less than full capacity, the min transfer price (the floor of the bargaining range) is

• $38.00
• $50.00
• $44
• $47.00

Which of the following is a perspective of the Balanced Scorecard?

• Learning and growth (infrastructure)
• Internal business process
• Customer
• All of these are perspectives of the Balanced Scorecard

The length of time it takes to produce a unit of output from raw materials to finished goods inventory is called

• velocity.
• cycle time.
• manufacturing cycle efficiency.
• theoretical cycle time.