Investment and Performance Quiz

Return on investment focuses on income as a percentage of investment, while residual income focuses on

• the capital charge.

• operating income less a capital charge.

• management decisions.

• cost of capital times the amount of investment.

Performance results for four geographic divisions of a manufacturing company are shown below. The division with the best performance is

• Division A

• Division B

• Division C

• Division D

A sign of the successful implementation of a balanced scorecard is the presence of cause-and-effect relationships. An example of this success for a hotel is meeting the target of

• decreasing a customer's check-in time, which causes an increase in the number of implemented employee suggestions.

• increasing employee training hours, which causes employee compensation to increase.

• increasing profit, which causes an increase in employee job satisfaction ratings.

• receiving more 5-star ratings from customers, which causes an increase in profit.

Wexford Co. has a subunit that reported the following data for year 1: The imputed interest rate is 10%. What is the division residual income for year 1?

• $60,000

• $30,000

• $10,000

• $0

Which one of the following best describes the performance elements contained in the most balanced scorecards?

• Neither financial performance measures nor non-financial performance measures.

• Only non-financial performance measures, and non-financial performance measures.

• Only financial performance measures, and not non-financial performance measures.

• Both financial performance measures and non-financial performance measures.

Calculate residual income from the following data: Net sales $500,000 Net income $75,000 Total assets $1,500,000 Total liabilities $1,200,000 Net assets $300,000 Cost of capital 3%

• $69,000

• $45,000

• $30,000

• $65,000

The balanced scorecard provides an action plan for achieving competitive success by focusing management attention on critical success factors. Which one of the following is not one of the competitive success factors commonly focused upon in the balanced scorecard?

• Competitor business strategies.

• Financial performance measures

• Internal business processes

• Employee innovation and learning.

Outlet Company makes and distributes beach equipment. Last year its sales were $15,000,000, net income was $2,000,000, and the assets used were $35,000,000. The return on investment was

• 5.71%.

• 4.3%.

• 43%.

• None of the answer choices are correct.

Which one of the following should be used for evaluating the performance of the Repair and Maintenance Department that repairs production equipment in a firm devoted to making keyboards for computers?

• The variance between the firm's budgeted and actual net income.

• The total factory overhead variances.

• The fixed overhead volume variances.

• The response time and degree of satisfaction among the production departments.

Perma Corporation's management has determined that the company's required rate of return on new projects is 7%. The Diddle Division, a highly profitable division, has a current Return on Investment of 13%. The Diddle Division's manager is considering a new project that would involve manufacturing frazzles. The project is expected to require an investment of $1 million and to have an annual Return on Investment of 10%. What is the project's projected Residual Income?

• $30,000

• $0.

• $100,000.

• $20,000.