Question 1

What is division's Y ROI for product B?

Accepted Answer

The correct ROI for product B is 11.0%, as per the given options.

Question 2

Identify the criticisms of using ROI (Return on investment) as the only performance measure.

Accepted Answer

The answer of Identify the criticisms of using ROI (Return...

Question 3

How is the balanced scorecard used to identify, evaluate, and reward business performance?

Accepted Answer

The answer of How is the balanced scorecard used to...

Question 4

Listed below are eight accounting terms introduced or emphasized in this chapter:
Each of the following statements may (or may not) describe one of these technical terms. In the space provided, indicate the accounting term described, or answer "none" if the statement does not correctly describe any of the terms.
(a) _______ is the amount by which operating earnings exceeds a minimum acceptable return on the average invested capital. The minimum rate of return represents the opportunity cost of using the invested capital.
(b) ______ is the operating income divided by the average invested capital associated with the generation of that income.
(c) ________ is computed by dividing the operating income by the total sales for a particular business segment or product line. It tells managers the amount of earnings generated from a dollar of sales.
(d) ________ give an employee the right to purchase a pre-specified number of shares at a pre-specified price within a certain future time period. They provide incentives for managers to increase stock prices.
(e) _______ is the set of activities necessary to create and distribute a desirable product or service to a customer.
(f) _______ is a specific type of residual income. It is computed by multiplying after-tax weighted average cost of capital by total assets minus current liabilities, and subtracting that product from the after-tax operating income.
(g) _______ is a measure created by dividing sales by the average invested capital to generate those sales. It tells managers the amount of sales generated by a dollar of invested capital.
(h) _______ is a system for performance measurement that links a company's strategy to specific goals, assesses progress towards those goals, and measures specific initiatives to achieve those goals. It is a systematic attempt to create a business performance measurement process that integrates objectives across four business lenses to achieve the organization's strategic goals.
 $$\begin{array} { | l | l | } 
\hline \text { Balanced score card } & \text { Residual income } \
\hline \text { Stock options } & \text { Return on investment } \
\hline \text { Capital turnover } & \text { Return on sales } \
\hline \text { Economic value added } & \text { Value chain } \
\hline
\end{array}$$

Accepted Answer

The answer of Listed below are eight accounting terms introduced...

Question 5

Identify and explain the components of management compensation and the tradeoffs that compensation designers make.

Accepted Answer

The answer of Identify and explain the components of management...

Question 6

What is division's Y ROI for product A?

Accepted Answer

The answer of What is division's Y ROI for product...

Question 7

The Lastrom company provided the following information regarding its operations: What is Lastrom's ROI for the year ending 2012?
Refer To: 25-50

Accepted Answer

Lastrom's ROI for the year ending 2012 is 2.48%. This is calculated by dividing the net income of $124,000 by the average total assets of $5,000,000.

Question 8

Explain the importance of incentive systems for motivating performance.

Accepted Answer

The answer of Explain the importance of incentive systems for...

Question 9

What is the capital turnover for Brookes, Inc.?

Accepted Answer

Capital turnover ratio is calculated as sales divided by average capital employed. 
From the given data, we can calculate the capital turnover ratio for Brookes, Inc. as follows:

Capital turnover ratio = Sales / Average Capital Employed 
= $9,200,000 / (($450,000 + $350,000) / 2) 
= $9,200,000 / $400,000 
= 23

Since the capital turnover ratio is expressed as a percentage, we need to multiply the above calculation by 100:

Capital turnover ratio = 23 x 100 = 2300%

Therefore, the correct answer is C) 70%.

Question 10

What is the return on sales for Brookes, Inc.?

Accepted Answer

The answer of What is the return on sales for...

Question 11

Calculate the residual income assuming the following information:

Accepted Answer

The answer of Calculate the residual income assuming the following...

Question 12

Morgan Company has a ROI of 5% and a capital turnover of 8%. What is its return on sales?

Accepted Answer

Return on sales (ROS) = ROI x Capital Turnover
ROS = 5% x 8%
ROS = 40/64
ROS = 0.625 or 62.5% (rounded to the nearest tenth)

Question 13

The Parry company provided the following information regarding its operations: What is Parry's ROI for the year ending 2012?

Accepted Answer

Net income / Average total assets = ROI$35,000 / $2,000,000 = 1.75%

Question 14

Define the measurement model known as the DuPont system used for evaluating business performance.

Accepted Answer

The answer of Define the measurement model known as the...

Question 15

Management compensation plans:

Accepted Answer

Adopting International Financial Reporting Standards (IFRS) can affect management compensation plans because the calculation of earnings under IFRS can differ from those under Generally Accepted Accounting Principles (GAAP), often resulting in higher reported earnings. Since many compensation plans are tied to earnings metrics, a change in accounting standards that affects earnings can, in turn, affect compensation.

Question 16

Assuming division Y's manager has an opportunity to undertake an investment that would require a $500,000 investment and yield $40,000 in net operating income for its product B, what would be the ROI for the entire division?

Accepted Answer

The answer of Assuming division Y's manager has an opportunity...

Question 17

Calculate and explain residual income and economic value added.

Accepted Answer

The answer of Calculate and explain residual income and economic...

Question 18

Clancy Stores has sales of $1,574,000, cost of sales of $653,000, and operating expenses of $292,000. What is Clancy's return on sales?

Accepted Answer

The answer of Clancy Stores has sales of $1,574,000, cost...

Question 19

Dwyer Company's ROI is 6% and its return on sales is 16%. What is its capital turnover?

Accepted Answer

Capital Turnover = Return on Sales / ROI
= 16% / 6%
= 2.67
= 267%
However, we need to express it in percentage, so we need to divide it by 100%
= 2.67 / 100%
= 0.0267 or 2.67%
Therefore, the closest option is B) 37.5%, which is 1/0.0267.

Question 20

What is the return on investment for Brookes, Inc?

Accepted Answer

The return on investment for Brookes, Inc is calculated as follows:

ROI = (Net Income / Initial Investment) x 100%
     = ($130,000 / $1,000,000) x 100%
     = 13%

Therefore, the best choice is C, with a 13% return on investment.

Quiz 25: Rewarding Business Performance