WorksheetsCOB 242 - Unit 4
Total questions: 23
Worksheet time: 10mins
In a decentralized organization _____.
decision-making authority is reserved for top management so lower level managers can concentrate on operations
lower-level managers have low motivation and job satisfaction due to increased responsibility
changes in the operating environment can be responded to rapidly
top management can concentrate on issues such as overall strategy
lower-level managers are trained for higher positions
Disadvantages of decentralization include _____.
defining organization strategy is difficult
clashing objectives between departments and the organization
spreading innovative ideas may be difficult
lack of coordination
The ROI formula typically uses ____.
end of year operating assets
average operating and non-operating assets for the year
average operating assets for the year
end of year operating and non-operating assets
EBIT is another terms for ____.
net operating income
income after taxes
residual income
operating assets
Operating assets include ____.
investments in bonds
inventory
accounts receivable
equipment
land held for investment
ROI can be calculated as ____.
net operating income ÷ average operating assets
margin x turnover
margin ÷ turnover
average operating assets ÷ net operating income
Which of the following ratios are part of the ROI formula?
Cost of goods sold ÷ Average inventory
Sales ÷ Average operating assets
Net operating income ÷ Sales
Sales on account ÷ Average accounts receivable
When a manager is evaluated on residual income, an investment is acceptable when ____.
net operating income for the new investment is above the current return on average operating assets
net operating income for the investment is above the minimum required return on average operating assets
it generates any positive net operating income
the return on investment of the new project equals or exceeds current ROI
Valid criticism of evaluating performance based on return on investment (ROI) include managers may ____.
reject investment opportunities that are profitable for the company but have a negative impact on a manager's ROI
be put in charge of a business segment that includes committed costs over which a manager has no control
take action that increase ROI in the short-run at the expense of long-term performance
affect ROI by increasing sales or decreasing operating expenses for their division
When managers are evaluated on residual income, rather than on return on investment (ROI), they will be ____ likely to pursue projects that will benefit the entire company.
more
less
equally
Garnett, Inc. has a required rate of return on new projects of 12%. The Western division of Garnett is currently earning a combined return on investment (ROI) of 14.5% on the projects in its division. The manager of the Western division is considering a project that is projected to earn 13.25%. Which of the following statements regarding the manager's decision are correct?
Rejecting the project would be an example of the manager sacrificing the objectives of the overall company in order to improve his segment.
The manager may decide to reject the project because it will lower the current ROI earned by his division.
The project will improve the ROI for the Western division, since it is above the required rate of return that the company has specified.
Differential costs and benefits that should be considered in a decision ____.
are always qualitative
are always quantitative
may be qualitative or quantitative
Focusing on future costs and benefits that are not the same between the choices is ____.
differential analysis
the total cost approach
irrelevant cost analysis
defining the alternatives
Irrelevant costs include ____.
future costs that differ between alternatives
future costs that do not differ between alternatives
sunk costs
all fixed costs
A business segment should only be dropped if a company can avoid more in fixed costs than it gives up in ____.
segment sales
net operating income
variable costs
contribution margin
Which of the following is an advantage of buying a part instead of making it?
Buying from suppliers ensures a smoother flow of parts and materials.
Economies of scale can result in higher quality and lower costs from suppliers.
Companies can realize profits from the parts and materials that it makes in addition to profits from its regular operations.
Companies can control quality better by purchasing from a supplier.
When a resource, such as space in a factory, has no alternative use, its opportunity cost is ____.
not determinable
infinite
zero
negative
A special order should be accepted ____.
when the incremental costs from the special order exceeds the incremental revenue of the order
when the incremental revenue from the special order exceeds the incremental costs of the order
almost always, because it means more business and will keep the employees productive
A company must make a volume trade-off decision when they ____.
must trade off units of one product for units of another due to limited production capacity
do not have enough capacity to satisfy the demand for all of its products
have excess capacity that is not currently being utilized
When a constraint exists, companies need to focus maximizing ____.
net income from sales
net sales
contribution margin per unit
contribution margin per unit of constraint
The point in the manufacturing process at which joint products can be recognized as separate products is called the ____ point.
split-off
sell or process
intermediate
opportunity
Joint costs are ____.
increased or decreased after the split-off point
common costs that must be allocated to make decisions about the individual products
economically attributable to all end products
irrelevant in decisions regarding what to do with a product after split-off
A joint product should be processed after split-off if the ____.
revenue after additional processing exceeds the revenue at the split-off point
total revenue exceeds the total incremental and allocated common costs
incremental revenue after split-off exceeds the incremental processing cost after split-off
