SHORT ANSWER.

Write the word or phrase that best completes each statement or answers the question. 71)

Designing an accounting based performance measure requires six steps. List each step. For three of the

steps, describe a question that must be resolved as part of the implementation process. 71)

_____________

72)

Batman Abstract Company has three divisions that operate autonomously. Their results for 2007 are as

follows:

Riddler

Joker

Penguin

Sales

$5,000,000

$7,000,000

$10,000,000

Contribution margin

1,440,000

1,700,000

3,500,000

Operating income

1,000,000

1,750,000

2,520,000

Investment base

9,000,000

10,000,000

14,000,000

The company's desired rate of return is 20%.

Required:

a.Compute each division's ROI.

b.Compute each division's residual income.

c.Rank each division by both ROI and residual income.

d.Which division had the best performance in 2007? Why?

 72)

_____________

73)

Hargrave Products has three divisions which operate autonomously. Their results for 2001 were as follows:

East

West

 International

Sales$30,000,000$40,000,000$50,000,000

Cost of goods sold$15,000,00025,000,00037,000,000

Operating income4,500,0004,750,0005,000,000

Investment base30,000,00030,500,00031,000,000

The company's desired rate of return is 15 percent.

Required:

a.Compute each division's ROI. Round to three decimal places.

b.Compute each division's residual income. 73)

_____________

74)

Kase Tractor Company allows its divisions to operate as autonomous units. The operating data for 2007

follow:

Plows

Tractors

Combines

Revenues

$2,250,000

$500,000

$4,800,000

Accounts receivable

800,000

152,500

1,435,000

Operating assets

1,000,000

400,000

1,750,000

Net operating income

220,000

60,000

480,000

Taxable income

165,000

90,000

385,000

Required:

a.Compute the investment turnover for each division.

b.Compute the return on sales for each division

c.Compute the return on investment for each division.

d.Which division manager is doing best? Why?

e.What other factors should be included when evaluating the managers?

For parts (b) and (c) income is defined as operating income.

 74)

_____________

75)

An art distribution Company has three divisions which operate autonomously. Their results for 2001 were as follows:

R-divisionJ-divisionG-division

Sales$5,000,000$7,000,000$10,000,000

Contribution margin1,440,0001,700,0003,500,000

Operating income1,000,0001,750,0002,520,000

Investment base9,000,00010,000,00014,000,000

The company's desired rate of return is 20 percent.

Required:

a.Compute each division's ROI.

b.Compute each division's residual income.

c.Rank each division by both ROI and residual income.

d.Which division had the best performance in 2001? Why? 75)

_____________

76)

Museum Corporation uses the investment centre concept for the museums that it manages. Select operating data for three of its museums for 2001 are as follows:

MontrealTorontoVancouver

Revenue$300,000$375,000$450,000

Total assets150,000125,000175,000

Net operating income25,50028,00029,500

Required:

a.Compute the return on investment for each division.

b.Which museum manager is doing best based only on ROI? Why?

c.What other factors should be included when evaluating the managers? 76)

_____________

77)

The Coffee Division of Canadian Products is planning the 2001 operating budget. Average Total assets of $1,500,000 will be used during the year and unit selling prices are expected to average $100 each. Variable costs of the division are budgeted at $400,000 while fixed costs are set at $250,000. The company's required rate of return is 18 percent.

Required:

a.Compute the volume necessary to achieve a 20 percent ROI.

b.The division manager receives a bonus of 50 percent of the residual income. What is his anticipated bonus for 2001 assuming he achieves the 20 percent ROI from part a? 77)

_____________

78)

LaserLife Printer Cartridge Company is a decentralized organization with several autonomous divisions. The division managers are evaluated, in part, on the basis of the change in their return on invested assets. Operating results for the Packer Division for 2001 are budgeted as follows:

Sales$5,000,000

Less variable costs2,500,000

Contribution margin$2,500,000

Less fixed expenses1,800,000

Net operating income$

700,000

Total assets for the division are currently $3,600,000. For 2001 the division can add a new product line for an investment of $600,000. The new product line will generate sales of $1,600,000 and will incur fixed expenses of $600,000 annually. Variable costs of the new product will average 60 percent of selling price.

Required:

a.What is the effect on ROI of accepting the new product line?

b.If the company's required rate of return is 6 percent, and residual income is used to evaluate managers, would this encourage the division to accept the new product line? Explain and show computations. 78)

_____________

79)

Capital Investments has three divisions. Each division's required rate of return is 15 percent. Planned operating results for 2001 are:

DivisionOperating incomeInvestment

A$15,000,000 $100,000,000

B25,000,000125,000,000

C11,000,00050,000,000

The company is planning an expansion requiring each division to increase its investments by $25,000,000 and its income by $4,500,000.

Required:

a.Compute the current ROI for each division.

b.Compute the current residual income for each division.

c.Rank the divisions according to their current ROIs and residual incomes.

d.Determine the effects after adding the new project to each division's ROI and residual income.

e.Which Divisions are pleased with the addition and which ones are unhappy assuming the managers are evaluated on a combination of ROI and residual income? Is a combination of ROI and residual income appropriate for the divisions? 79)

_____________

80)

Kase Tractor Company allows its divisions to operate as autonomous units. The tax rate is 35% and other operating data for 2001 follow:

PlowsTractors Combines

Revenues $2,250,000 $500,000 $4,800,000

Accounts receivable 800,000152,5001,435,000

Total assets1,000,000400,0001,750,000

Net operating income220,000 60,000480,000

Taxable income165,000 90,000385,000

WACC11.5%11.5%11.5%

Required:

a.Compute the return on investment for each division.

b.Compute the EVA for each division

c.What other ratio could be calculated for performance evaluation? 80)

_____________

SHORT ANSWER.

Write the word or phrase that best completes each statement or answers the question. 71)

Designing an accounting based performance measure requires six steps. List each step. For three of the

steps, describe a question that must be resolved as part of the implementation process. 71)

_____________

72)

Batman Abstract Company has three divisions that operate autonomously. Their results for 2007 are as

follows:

Riddler

Joker

Penguin

Sales

$5,000,000

$7,000,000

$10,000,000

Contribution margin

1,440,000

1,700,000

3,500,000

Operating income

1,000,000

1,750,000

2,520,000

Investment base

9,000,000

10,000,000

14,000,000

The company's desired rate of return is 20%.

Required:

a.Compute each division's ROI.

b.Compute each division's residual income.

c.Rank each division by both ROI and residual income.

d.Which division had the best performance in 2007? Why?

 72)

_____________

73)

Hargrave Products has three divisions which operate autonomously. Their results for 2001 were as follows:

East

West

 International

Sales$30,000,000$40,000,000$50,000,000

Cost of goods sold$15,000,00025,000,00037,000,000

Operating income4,500,0004,750,0005,000,000

Investment base30,000,00030,500,00031,000,000

The company's desired rate of return is 15 percent.

Required:

a.Compute each division's ROI. Round to three decimal places.

b.Compute each division's residual income. 73)

_____________

74)

Kase Tractor Company allows its divisions to operate as autonomous units. The operating data for 2007

follow:

Plows

Tractors

Combines

Revenues

$2,250,000

$500,000

$4,800,000

Accounts receivable

800,000

152,500

1,435,000

Operating assets

1,000,000

400,000

1,750,000

Net operating income

220,000

60,000

480,000

Taxable income

165,000

90,000

385,000

Required:

a.Compute the investment turnover for each division.

b.Compute the return on sales for each division

c.Compute the return on investment for each division.

d.Which division manager is doing best? Why?

e.What other factors should be included when evaluating the managers?

For parts (b) and (c) income is defined as operating income.

 74)

_____________

75)

An art distribution Company has three divisions which operate autonomously. Their results for 2001 were as follows:

R-divisionJ-divisionG-division

Sales$5,000,000$7,000,000$10,000,000

Contribution margin1,440,0001,700,0003,500,000

Operating income1,000,0001,750,0002,520,000

Investment base9,000,00010,000,00014,000,000

The company's desired rate of return is 20 percent.

Required:

a.Compute each division's ROI.

b.Compute each division's residual income.

c.Rank each division by both ROI and residual income.

d.Which division had the best performance in 2001? Why? 75)

_____________

76)

Museum Corporation uses the investment centre concept for the museums that it manages. Select operating data for three of its museums for 2001 are as follows:

MontrealTorontoVancouver

Revenue$300,000$375,000$450,000

Total assets150,000125,000175,000

Net operating income25,50028,00029,500

Required:

a.Compute the return on investment for each division.

b.Which museum manager is doing best based only on ROI? Why?

c.What other factors should be included when evaluating the managers? 76)

_____________

77)

The Coffee Division of Canadian Products is planning the 2001 operating budget. Average Total assets of $1,500,000 will be used during the year and unit selling prices are expected to average $100 each. Variable costs of the division are budgeted at $400,000 while fixed costs are set at $250,000. The company's required rate of return is 18 percent.

Required:

a.Compute the volume necessary to achieve a 20 percent ROI.

b.The division manager receives a bonus of 50 percent of the residual income. What is his anticipated bonus for 2001 assuming he achieves the 20 percent ROI from part a? 77)

_____________

78)

LaserLife Printer Cartridge Company is a decentralized organization with several autonomous divisions. The division managers are evaluated, in part, on the basis of the change in their return on invested assets. Operating results for the Packer Division for 2001 are budgeted as follows:

Sales$5,000,000

Less variable costs2,500,000

Contribution margin$2,500,000

Less fixed expenses1,800,000

Net operating income$

700,000

Total assets for the division are currently $3,600,000. For 2001 the division can add a new product line for an investment of $600,000. The new product line will generate sales of $1,600,000 and will incur fixed expenses of $600,000 annually. Variable costs of the new product will average 60 percent of selling price.

Required:

a.What is the effect on ROI of accepting the new product line?

b.If the company's required rate of return is 6 percent, and residual income is used to evaluate managers, would this encourage the division to accept the new product line? Explain and show computations. 78)

_____________

79)

Capital Investments has three divisions. Each division's required rate of return is 15 percent. Planned operating results for 2001 are:

DivisionOperating incomeInvestment

A$15,000,000 $100,000,000

B25,000,000125,000,000

C11,000,00050,000,000

The company is planning an expansion requiring each division to increase its investments by $25,000,000 and its income by $4,500,000.

Required:

a.Compute the current ROI for each division.

b.Compute the current residual income for each division.

c.Rank the divisions according to their current ROIs and residual incomes.

d.Determine the effects after adding the new project to each division's ROI and residual income.

e.Which Divisions are pleased with the addition and which ones are unhappy assuming the managers are evaluated on a combination of ROI and residual income? Is a combination of ROI and residual income appropriate for the divisions? 79)

_____________

80)

Kase Tractor Company allows its divisions to operate as autonomous units. The tax rate is 35% and other operating data for 2001 follow:

PlowsTractors Combines

Revenues $2,250,000 $500,000 $4,800,000

Accounts receivable 800,000152,5001,435,000

Total assets1,000,000400,0001,750,000

Net operating income220,000 60,000480,000

Taxable income165,000 90,000385,000

WACC11.5%11.5%11.5%

Required:

a.Compute the return on investment for each division.

b.Compute the EVA for each division

c.What other ratio could be calculated for performance evaluation? 80)

_____________

61) Which of the following is an example of a normative economic statement?

A) Universal access to quality health insurance is the most important domestic policy issue of our time.

B) Extending the time in which laid-off workers are eligible to receive government unemployment compensation has increased the unemployment rate.

C) Lowering marginal income tax rates depresses consumer spending.

D) Prices rise when the government prints too much money.

E) Interest rates rise when the government runs persistent budget deficits.

62) A statement that "All children should receive free health care" is an example of what kind of statement?

A) a fair statement

B) a natural experiment statement

C) a normative statement

D) a positive statement

E) a statement on the margin

63) Which of the following statements is a normative statement?

A) Inflation has been at an all-time low this year.

B) The minimum wage should be increased to $8.50 per hour.

C) Unemployment this month has increased by less than 0.5 percentage point..

D) Additional spending on education has not produced any rise in test scores.

E) Pepsi is less expensive than Coke this week.

64) Which of the following is an example of a normative statement?

A) If cars become more expensive, fewer people will buy them.

B) Car prices should be affordable.

C) If wages increase, firms will fire some workers.

D) Fewer people die in larger cars than in smaller cars.

E) Cars emit pollution.

65) Which of the following statements is a normative statement?

A) Every American household should have health care insurance coverage.

B) Military spending as a percent of government spending decreased by 5 percent in the 1990s.

C) Welfare reform has decreased the amount the government spends on welfare.

D) The price of computers fell last year.

E) Fewer people are unemployed this year than last year.

66) Congress and the President passed a national health care policy. This is an example of

A) the government using economic tools to make policy decisions.

B) answering the "how" question.

C) increasing the marginal cost of health care.

D) increasing the marginal benefit of health care.

E) normative versus positive economics.

67) Opportunity cost is best defined as

A) how much money is paid for something.

B) how much money and time it takes to consume something.

C) the value of the highest-valued alternative that is forgone in making a choice.

D) the total of all other alternatives that are forgone in making a choice.

E) the sunk cost of any decision.

68) John has two hours of free time this evening. He ranked his alternatives, first go to a concert, second go to a movie, third study for an economics exam, and fourth answer his e-mail. What is the opportunity cost of attending the concert for John?

A) attending a movie

B) studying for an economics exam

C) answering his e-mail

D) attending a movie, studying for an economics exam, and answering his e-mail

E) going to the concert because that is what John choose to do

69) Jamie has enough money to buy either a Mountain Dew, or a Pepsi, or a bag of chips. He chooses to buy the Mountain Dew. The opportunity cost of the Mountain Dew is

A) the Pepsi and the bag of chips.

B) the Pepsi or the bag of chips, whichever the highest-valued alternative forgone.

C) the Mountain Dew.

D) the Pepsi because it is a drink, as is the Mountain Dew.

E) zero because he enjoys the Mountain Dew.

70) Amy can study for an hour or spend that hour sleeping or going out for dinner. If she decides to study for the hour, the opportunity cost of the hour spent studying is

A) definitely going to sleep.

B) studying since this is the choice she opted for.

C) sleeping or going out for dinner, whichever she would have preferred the most.

D) sleeping and going out for dinner.

E) definitely going out to dinner because she must eat at some time.

They have a magnificent team. These people are always kind and willing to listen to your concerns or issues. Better yet, your assignment is always ready before the time, they usually send you a draft to double-check before they finalize your paper.

Completed quickly and followed instructions given. Grammar, spelling, etc. was all good as well. Thank you so much! Will hire in the future.

The work has not been graded but I like the output that was submitted to me. Is it possible for the same prof to do the next assignment I will be submitting? If possible, I will greatly appreciate it.

My third using this writer and absolutely amazing work! Very punctual and very understanding.

Outstanding job in writing my paper. I am always thrill to receive a well written paper that follows the instructions and the thorough details put into my paper. The quality of this paper is beyond awesome. Thank you so much.

I absolutely love this writer! He/she always cranks out a fabulous paper and follows the assignment guidelines/instructions perfectly. Thanks again for always providing such quality work!!!

It took some time to achieve the product I was looking for, but we eventually got there. I do feel like a lot of hard work was put into this, and it even exceeded the page requirement. I'm pretty pleased overall. I give my thanks.

Outstanding work! This writer followed every instruction and my paper came back with an A! I recommend to anyone needing help! Thank you again ❤️

Outstanding job in writing my paper. I am always thrill to receive a well written paper that follows the instructions and the thorough details put into my paper. The quality of this paper is beyond awesome. Thank you so much.

Made 100% on both the outline and the paper. Quick turnaround time and my writer responded within 30 min or less. Any edits my instructor needed, my writer was patient and worked diligently to accomplish the task. Would recommend my writer to anyone!

You are making my life so much easier! I am a single mom that works and goes to school. You guys are helping me with my projects so I can have more free time with my son.

I was sure it can fit in a single page but the next time I will add one more page because I am impressed with your professionalism and quality. Will use many more times till I graduate.

Simple registration and quality services. I just ordered one paper, and it was good enough to pass the exam. That is what I need the most. Good job.

I couldn’t finish my freaking essay, and I was very desperate. A friend of mine sent me a link, and that is how I found out about you guys. Thank you for professional tips and editing. Now, I understand how to write it properly.

I’m so grateful to you since you managed to complete my term paper in one day! You are definitely the best company ever!

I am sure on your ability to provide any type of paper I will order. I wish I could develop that skill your writers have to be able to have a flow of ideas and excellent sequencing of thoughts in writing.

I ordered a thesis paper and was satisfied. All the guys were polite and highly professional, even when I wrote to them several times per day. Thanks for your passion!

I turned to the service twice, and my papers always were beyond the expectations. To tell the truth, I was ready to find some grammar errors or something like that. However, everything was neat and tidy.

My friend recommended Doctor My Essay to me. It is convenient! Now we both turn to the service periodically coz wanna save some time and use it more effectively. I know that while I’m developing my startup, an expert is working on paper. Time management in work!

I write all paper works by myself but have some problems with literacy. Actually, I have enormous problems because English is not my native language. However, with proofreading from Doctor My Essay, I can relax and don’t be ashamed of mistakes.

Your ability to write concisely is a finding. The paper has a solid argument. It’s clear that the writer understood central claim about the topic. He also presented original ideas to consider.

That paper got the highest grade in my class and the professor thinks I’m the smartest student. Lol.

I was convinced that paper writing services are the fiction for naive students. But when it came to my research paper that was to be composed in 72 hours, I had no other options. I made the right choice when I ordered it from you!

I was also satisfied with the service. Usually, I write everything by myself, but this time ( I have no idea how it happens!) I missed the deadline. My writer was very responsible, wrote the essay quickly, and kept the instructions. Nice to know that such experts exist!

It is really affordable! The prices start from 9$, which is an excellent proposal on the market. Recently I worked with another service that took much more money and provided lower quality papers.

I am absolutely satisfied. I am first timer here. Revision was made quickly, and the author met my expectations. Thanks a lot. Paper is phenomenal.

Having heard a lot of negative reviews about such services, I was a bit skeptical. However, our cooperation with Doctor My Essay was without pitfalls. I made two comments about the final work, and they re-wrote some parts very promptly. I am satisfied and will turn to them in the future.

It was my first experience in online ordering, and I was a bit nervous. However, this was for nothing. I’ve got a high mark!

I understand that buying essays is a doubtful thing. You don’t put effort, don’t represent your ideas… However, I don’t perceive Doctor My Essay as a standard service. They don’t sell papers. They share high expertise!

According to my previous experience, this service is really the best. They support the client and have competitive writers. I give them a perfect score!

Nice service! It is cool that you can use the calculator on the main page and understand the price policy. For me, it is a huge plus!

Thanks to God I found this service! If I didn’t send my research to the teacher on time, he would eat me. I tell you! However, with doctor my essay service, I met the deadline, and I am still alive.

Your service is excellent! Convenient and not expensive. Thanks for that!

If you have problems with time management, just like me, you need to cooperate with Doctor My Essay. Once you registered and made the order, you understand how easier it makes your life! Everything is online: ordering, communication… You can control the process everywhere and be sure that an expert will provide a high-level paper.