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finance data bank




Question;50.;If both divisions were presented with an;opportunity to invest in a project that is estimated to achieve an ROI of 15%;what will the units likely decide?;A.;Division P will invest, Division Q will;not invest.;B.;Division P will invest, Division Q will;be indifferent.;C.;Division P will not invest, Division Q;will invest.;D.;Division P will be indifferent, Division;Q will not invest.;E.;Neither unit will invest in the;projects.;Selected data from Chering Division's;accounting records revealed the following;52.;Chering;Division's return on investment (ROI) is;A.;6.0%.;B.;8.0%.;C.;14.0%.;D.;15.0%.;E.;20.0%.;53.;Chering;Division's return on sales (ROS) is;A.;6.0%.;B.;8.0%.;C.;14.0%.;D.;15.0%.;E.;20.0%.;54.;Chering;Division's asset turnover (AT) is calculated to be;A.;1.070.;B.;1.625.;C.;1.875.;D.;4.270.;E.;12.500.;55.;Chering;Division's residual income (RI) is;A.;$4,400.;B.;$8,800.;C.;$9,240.;D.;$22,380.;E.;$49,500.;56. If;the minimum rate of return (i.e., cost of capital) was 13%, Chering Division's;residual income (RI) would calculate to be;A.;$4,400.;B.;$8,800.;C.;$9,240.;D.;$22,380.;E.;$49,500.;57.;An investment center's return on investment (ROI) is affected by a change in;A.;Option;A;B.;Option B;C.;Option C;D.;Option D;E.;Option E;58.;The;return on investment (ROI) ratio measures;A.;The rate of return on average;shareholders' equity.;B.;Only earnings as a percent of sales.;C.;Both asset turnover (AT) and return on;sales (ROS).;D.Asset;turnover (AT) and earnings as a percent of sales, correcting for the effects of;differing depreciation methods.;E.;Operating income less a charge for;divisional investment (assets).;59. Return;on investment (ROI) is a term often used to express income earned on capital;invested in a division (investment center). A division's ROI would increase if;A.;Sales increased by the same dollar;amount as expenses and total assets increased.;B.Sales;remained the same and expenses were reduced by the same dollar amount that;total assets increased.;C.;Sales decreased by the same dollar;amount that expenses increased.;D.;Sales and expenses increased by the same;percentage that total assets increased.;E.;Net profit margin on sales increased by;the same percentage that total assets increased.;60.;Residual;income (RI) is;A.;Contribution margin of an investment;center, less the imputed interest on the invested capital used by the center.;B.;Operating income of an investment center;divided by average total assets.;C.;Another name for Economic Value Added;(EVA?);D.;Operating income of an investment;center, less the imputed interest on the invested capital used by the center.;E.;Operating income of an investment;center, plus the imputed interest on the invested capital used by the center.;The following results pertain to;an investment center.;61.;How;much is the residual income (RI) for this investment center?;A.;$100,000.;B.;$500,000.;C.;$600,000.;D.;$700,000.;E.;$800,000.;62.;How;much is the return on investment (ROI) for this investment center?;A.;5%.;B.;50%.;C.;60%.;D.;70%.;E.;75%.;63. Residual;income (RI) may be a better measure for performance evaluation of an investment;center than return on investment (ROI) because;A.;The problems associated with measuring;the asset base are eliminated.;B.;Desirable investment decisions will not;be discouraged by high-rate-of-return divisions.;C.;Only the gross book value (GBV) of;assets needs to be calculated.;D.;Returns do not increase as assets are;depreciated.;E.;The arguments over the appropriate discount;rate to use in the calculations are eliminated.;64. Given;a competitive outside market for identical intermediate goods, what is the best;transfer price, assuming all relevant information is readily available?;A.;Average cost of production.;B.;Average cost of production, plus average;production department allocated profit.;C.;Market price of the intermediate goods.;D.;Market price of the intermediate goods;less average production department allocated profit.;E.;Full cost, plus a mark-up for profit.;65.;Transfer prices based on actual costs of;the selling division as opposed to standard costs incurred by that division;A.;Are preferred by the purchasing;division.;B.;Often fail to provide the selling;division with an incentive to control costs.;C.;Often encourage the selling division to;control costs.;D.;Are required by international financial;reporting standards.;E.;Often encourage the purchasing division;to control costs.


Paper#51013 | Written in 18-Jul-2015

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