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Question;21. A;measure of the manager's ability to control expenses and increase revenues;in order to improve profitability is;A.;Residual income (RI) divided by level of;invested capital.;B.;Return on equity (ROE).;C.;Return on investment (ROI).;D.;Return on sales (ROS).;E.;Asset turnover (AT).;22.;A;measure of the manager's ability to produce increased sales from a given;level of investment is;A.;Residual income (RI) divided by level of;invested capital.;B.;Return on equity (ROE).;C.;Return on investment (ROI).;D.;Return on sales (ROS).;E.;Asset turnover (AT).;28.;The;historical cost of an asset less its accumulated depreciation is;A.;Net book value (NBV).;B.;Return on equity (ROE).;C.;Return on investment (ROI).;D.;A rough measure of current replacement;cost of the asset.;E.;An estimate of liquidation value of the;asset.;29.;Replacement;cost of a division's assets will most probably be greater than;A.;Gross book value (GBV) of the assets.;B.;Historical cost of the assets.;C.;Liquidation value of the assets.;D.;Price-level adjusted cost of the assets.;E.;Current cost of the assets.;30. Which;one of the following is not a limitation shared by residual income (RI);and return on investment (ROI) divisional performance measures?;A.;They are both short-term performance;indicators.;B.;They both may fail to capture;significant value-creating activities of the organization.;C.;They are both subject to short-term;manipulation on the part of divisional managers.;D.;Both are subject to a number of;measurement issues that complicate their use in practice.;E.;They both relate, in percentage terms;earnings to the level of investment in each division.;31.;The;estimated cost to replace assets at the current level of service and;functionality is defined as;A.;Gross book value.;B.;Historical cost, plus accumulated;depreciation to date.;C.;Liquidation value.;D.;Replacement cost.;E.;Price-level adjusted original cost.;32.;The;estimated price that could be received for the sale of divisional assets is;referred to as;A.;Gross book value (GBV), plus accumulated;depreciation to date.;B.;Gross book value (GBV).;C.;Price-level adjusted cost.;D.;Replacement cost.;E.;Liquidation value.;33. A;dollar amount equal to the operating income of a division less a charge for the;level of investment in the division is called;A.;Operating profit after tax.;B.;Return on investment (ROI).;C.;Earnings from continuing operations.;D.;Return on equity (ROE).;E.;Residual income (RI).;34.;A division's after-tax cash operating;income less depreciation and less an imputed cost of capital is called its;A.;After-tax operating income.;B.;Income from continuing operations.;C.;Return on sales (ROS).;D.;Economic value added (EVA?).;E.;Residual income (RI).;35.;ROI;though widely used, is subject to which one of the following limitations?;A.;ROI cannot incorporate differences in;risk across different divisions.;B.;ROI ignores the amount of capital;invested in a division.;C.;ROI may not capture value-creation for;firms operating in capital-intensive industries.;D.;ROI may motivate managers to take;suboptimal decisions from the standpoint of the organization as a whole.;E.;ROI cannot be used to judge the;performance of units of different size.;36.;All;of the following are listed as possible transfer pricing methods except;A.;Market price.;B.;Variable cost.;C.;Fixed cost.;D.;Full cost.;E.;Negotiated price.;37. Which;one of the following establishes an "arm's-length price" by using the;sales prices of similar products made by unrelated firms?;A.;Wholesale-price method.;B.;Retail-price method.;C.;Related-products method.;D.;Cost-plus method.;E.;Comparable-price method.;38.;Which one of the following transfer;pricing alternatives is based on determining an appropriate markup, where the;markup is based on gross profits of unrelated firms selling similar products?;A.;Wholesale-price method.;B.;Resale-price method.;C.;Net-price method.;D.;Cost-plus method.;E.;Comparable-price method.;39.;Which one of the following determines;the transfer price based on the seller's costs, plus a gross profit percentage;determined from comparison of sales of the seller to those of unrelated;parties?;A.;Wholesale-price method.;B.;Resale-price method.;C.;Net-price method.;D.;Cost-plus method.;E.;Comparable-price method.;Consider the following data for;three divisions of a company, X, Y, and Z;40.;The;return on investment (ROI) for Division X is;A.;8.0%.;B.;12.0%.;C.;20.0%.;D.;25.0%.;E.;40.0%.;41.;The;return on investment (ROI) for Division Y is;A.;8.0%.;B.;12.0%.;C.;20.0%.;D.;25.0%.;E.;40.0%.;42.;The;return on investment (ROI) for Division Z is;A.;8.0%.;B.;12.0%.;C.;20.0%.;D.;25.0%.;E.;40.0%.;43.;The;return on sales (ROS) for Division X is;A.;5.0%.;B.;8.0%.;C.;12.0%.;D.;14.0%.;E.;20.0%.;44.;The;return on sales (ROS) for Division Y is;A.;5.0%.;B.;8.0%.;C.;12.0%.;D.;14.0%.;E.;20.0%.;45.;The;return on sales (ROS) for Division Z is;A.;5.0%.;B.;8.0%.;C.;12.0%.;D.;14.0%.;E.;20.0%.;46.;The;asset turnover (AT) for Division X is (rounded);A.;1.43.;B.;1.60.;C.;1.67.;D.;2.86.;E.;3.33.;47.;The;asset turnover (AT) for Division Y is calculated to be (rounded);A.;1.43.;B.;1.60.;C.;1.67.;D.;2.86.;E.;3.33.;48.;The;asset turnover (AT) for Division Z is;A.;1.43.;B.;1.60.;C.;1.67.;D.;2.86.;E.;3.33.;Consider the following data from;two divisions of a company, P and Q;49.;If;the minimum rate of return is 11%, what is Division P's residual income (RI)?;A.;$160,000.;B.;$1,040,000.;C.;$1,060,000.;D.;$1,434,000.;E.;$3,934,000.;50.;If;the minimum rate of return is 11%, what is Division Q's residual income (RI)?;A.;$147,500.;B.;$490,000.;C.;$752,000.;D.;$950,000.;E.;$1,049,500.

Paper#51080 | Written in 18-Jul-2015

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