Question : 148.The following information available for Halle Department Stores: Average operating assets$600,000 Controllable : 1311874

 

148.The following information is available for Halle Department Stores:

Average operating assets$600,000

Controllable margin60,000

Contribution margin150,000

Minimum rate of return8%

How much is Halle’s residual income?

a.$102,000

b.$540,000

c.$12,000

d.$48,000

 

 

a149.What is the goal of residual income?

a.To maximize the amount of costs which are controllable

b.To maximize profits

c.To maximize the total amount of residual income

d.To maximize controllable margin

 

 

a150.Which one of the following is a correct statement about residual income?

a.Its goal is to maximize profits of an investment center.

b.It is less effective for evaluating investment centers than ROI.

c.It is the ratio of controllable margin to the minimum rate of return on average operating assets.

d.It evaluates performance by comparing the return of an investment center with the company’s minimum rate of return.

 

 

a151.Which one of the following does not impact the amount of residual income?

a.Contribution margin

b.Net income

c.Sales

d.Controllable costs

 

 

a152.For what purpose do companies calculate residual income?

a.To determine whether decentralization is possible or not

b.To motivate managers through possible termination

c.To evaluate management performance

d.To measure company profits

 

 

a153.Lew Co. had sales of $400,000, variable costs of $200,000, and direct fixed costs totaling $100,000. The company’s operating assets total $800,000, and its required return is 10%. How much is the residual income?

a.$120,000

b.$20,000

c.$80,000

d.$320,000

 

 

a154.Quincy Corp. earned controllable margin of $500,000 on sales of $6,400,000. The division had average operating assets of $5,200,000. The company requires a return on investment of at least 8%. How much is residual income?

a.$416,000

b.$84,000

c.$584,000

d.$512,000

 

a155.The performance of the manager of Ottawa Division is measured by residual income. Which of the following would decrease the manager’s performance measure?

a.Decrease in required rate of return

b.Increase in amount of return on investment desired

c.Increase in sales

d.Increase in contribution margin

 

 

156.              Which of the following would not be considered an aspect of budgetary control?

a.It assists in the determination of differences between actual and planned results.

b.It provides feedback value needed by management to see whether actual operations are on course.

c.It assists management in controlling operations.

d.It provides a guarantee for favorable results.

 

 

157.              A static budget is usually appropriate in evaluating a manager’s effectiveness in controlling

a.fixed manufacturing costs and fixed selling and administrative expenses.

b.variable manufacturing costs and variable selling and administrative expenses.

c.fixed manufacturing costs and variable selling and administrative expenses.

d.variable manufacturing costs and fixed selling and administrative expenses.

 

 

 

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