Question : 121. Bradford Inc.Bradford Inc. manufactures and sells digital cameras. Bradford’s management : 1291615

121. Bradford Inc.Bradford Inc. manufactures and sells digital cameras. Bradford’s management team has begun an intensive program whereby more time and effort are to be focused on product quality than were focused on in the past. The following data has been compiled regarding expected quality costs in the upcoming year: 

Product quality audits

$90,000

Quality training

60,000

Rework costs

40,000

Warranty claims

70,000

Inspection of incoming materials

30,000

Scrap costs

24,000

Statistical process control

30,000

Refer to the Bradford Inc. information above. What are Bradford’s total internal failure costs? A. $60,000B. $64,000C. $150,000D. $70,000

122. Bradford Inc.Bradford Inc. manufactures and sells digital cameras. Bradford’s management team has begun an intensive program whereby more time and effort are to be focused on product quality than were focused on in the past. The following data has been compiled regarding expected quality costs in the upcoming year: 

Product quality audits

$90,000

Quality training

60,000

Rework costs

40,000

Warranty claims

70,000

Inspection of incoming materials

30,000

Scrap costs

24,000

Statistical process control

30,000

Refer to the Bradford Inc. information above. What are Bradford’s total external failure costs? A. $70,000B. $60,000C. $140,000D. $100,000

123. Grayson & Sons, a local car dealership, has three separate divisions: car repair, new car sales, and used car sales. The company has decided to implement a new system for evaluating the performance of its three division managers and the bonuses they receive. The following information is available with respect to each division for the current year: 

Car Repair

New Car Sales

Used Car Sales

Operating income

$2,000,000

$  8,000,000

$3,000,000

Operating assets

3,000,000

18,000,000

8,000,000

In order to receive a bonus, a division manager must have an ROI greater than 50% and residual income in excess of $1,400,000. If management uses a minimum required rate of return of 18%, which division manager(s) would be eligible to receive a bonus? A. Car repair onlyB. New car onlyC. Used car onlyD. Car repair, new car, and used car

124. Which of the following situations is most likely to pose a problem for companies that use return on investment (ROI) as a measure of a manager’s performance? A. Managers may be encouraged to purchase more operating assets than they otherwise should.B. Managers may be discouraged from purchasing operating assets that could improve overall profitability.C. Managers may be discouraged from reducing their division’s costs.D. Managers may be discouraged from paying off debt in order to reduce interest costs.

125. Which of the following forms of manager compensation most likely encourages managers to take a long-term view of how their performance ties in with the long-term goals of a company? A. Year-end cash bonusB. Base salaryC. Stock optionsD. Use of a company car

126. Which of the following statements about managerial compensation is correct? A. Compensating managers with year-end cash bonuses always motivates managers to do what is best for the company as a whole.B. From a manager’s standpoint, cash compensation is always preferable over stock-based compensation.C. Manager compensation should always be either cash-based or stock-based.D. Stock-based manager compensation does not guarantee a future cash benefit to managers.

127. Which of the following statements about stock-based managerial compensation is correct? A. It may cause dysfunctional behavior in the short-run as managers try to drive up the company’s stock price.B. Exercising the option as soon as it is granted will leave the manager better off from a cash standpoint.C. Stock options are always guaranteed to increase in value over time.D. Managers always prefer to receive stock options instead of year-end bonuses.