Question :
141.Last year, Green Thumb’s Residential Division reported sales of $950,000, : 1302906
141.Last year, Green Thumb’s Residential Division reported sales of $950,000, interest expense of $100,000, and net income of $126,000. The company’s tax rate is 30 percent, and it has an 8 percent cost of capital and a 9 percent required rate of return. Residential Division has noninterest-bearing current liabilities that total $75,000 and it has total assets of $820,000.How much is the Residential Division’sresidual income/(loss)?
A.$136,400
B.$128,950
C.$96,400
D.($3,600)
142.Under which one of the following performance evaluation methods will a manager most likely ‘overinvest’?
A.ROI
B.Residual income
C.EVA
D.Profit
143.Which of the following components are evaluated when using the Balanced Scorecard approach?
A.Innovation, financial, expansion, and internal processes
B.Value added, innovation/growth, expansion, and customer
C.Financial, development, expansion and research
D.Learning and growth, financial, customer, and internal processes
144.Which one of the following is not an advantage of decentralization for an organization?
A.Enhanced goal congruence, because the subunits managers are more focused to improve the performance of the company as a whole.
B.Faster response to changing circumstances, because decisions are not made by higher-level managers who need to be advised of all the facts
C.Increased motivation of managers, because they are responsible for their own decisions and the results of their respective divisions
D.Better training for future executives, because lower level managers get involved in more diverse business decisions
145.Why are accounting distortions removed when evaluating performance using EVA?
A.To remove amounts that are a free source of financing
B.To remove amounts that divisional managers are unable to control
C.To remove the costs of assets that must be capitalized under GAAP
D.To encourage managers to spend money on elements that will benefit the company in the long run
146.Why is an adjustment made to net income when calculating NOPAT?
A.It is an amount on which income taxes are not considered.
B.This adjustment amount has no cost of capital associated with it.
C.Only assets that incur no interest costs are included with NOPAT.
D.Divisional managers have no ability to control costs such as these.
147. Why is an adjustment made to assets when determining residual income?
A.The assets to which these relate have no financing cost associated with them.
B.The company incurs financing costs, which is not within divisional managers’ control.
C.This amount is not controllable by the managers being evaluated.
D.Only assets that incur no interest costs are included aspart of invested capital.
148.Standard Mediahas a required rate of return of 5 percent, a cost of capital of 4 percent, and an income tax rate of 30 percent. The following information about its two divisions has been provided by management:
Audio DivisionVideoDivision
NOPAT$1,400,000$2,000,000
Sales$10,000,000$12,500,000
Invested capital$15,000,000$17,500,000
How muchis the residual income of the Audio Division?
A.$600,000
B.$650,000
C.$800,000
D.$2,000,000
149.Standard Mediahas a required rate of return of 5 percent, a cost of capital of 4 percent, and an income tax rate of 30 percent. The following information about its two divisions has been provided by management:
Audio DivisionVideo Division
NOPAT$1,400,000$2,000,000
Sales$10,000,000$12,500,000
Invested capital$15,000,000$17,500,000
As it relates to investment center evaluation, how much isthe profit marginofthe VideoDivision?
A.11.4%
B.71.43%
C.60.00%
D.16.00%
150.Standard Mediahas a required rate of return of 5 percent, a cost of capital of 4 percent, and an income tax rate of 30 percent. The following information about its two divisions has been provided by management:
Audio DivisionVideo Division
NOPAT$1,400,000$2,000,000
Sales$10,000,000$12,500,000
Invested capital$15,000,000$17,500,000
How much is theROIofthe Audio Division?
A.9.33%
B.66.67%
C.14.00%
D.16.00%
