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25-17
39.
A system that considers the earnings per sales dollar and the investment used to generate
those sales dollars is called:
Division Y of the Mortisen Company produces and sells 2 products. Each product's
operating income and average capital resources are shown below:
Product A: Operating Income $500,000; Average capital $5,000,000.
Product B: Operating Income $350,000; Average capital $4,100,000.
40.
Refer to the information above. What is division's Y ROI for product A?
41.
Refer to the information above. What is division's Y ROI for product B (round your answer
to the nearest full percentage point)?
42.
Refer to the information above. Assuming division Y's manager has an opportunity to
undertake an investment that would require a $500,000 investment and yield $40,000 in net
operating income for its product B, what would be the ROI for the entire division (round
your answer to the nearest full percentage point)?
43.
Residual income can be defined as:
44.
Calculate the residual income assuming the following information:
45.
In considering customer's needs, the balanced scorecard method will look at:
46.
The set of activities necessary to create and distribute a desirable product or service to a
customer is known as:
47.
The value chain usually starts with the _________ and ends with the ____________.
48.
Which of the following is
not
a measure used by the financial perspective lens of the
balanced scorecard?
49.
Which of the following is
not
one of the strategies of the financial perspective lens of the
balanced scorecard?
50.
Which of the following is
not
one of the balanced scorecard lenses?
51.
Which of the following is
not
a strategy of the learning and growth lens of a balanced
scorecard?
52.
One of the strategies of the business process perspective lens of the balanced scorecard is
to improve the quality of the manufacturing process. Which of the following is
not
one of
the measures?
53.
Management compensation plans:
25-25
Essay Questions
25-26
54.
Listed below are eight accounting terms introduced or emphasized in this chapter:
Each of the following statements may (or may not) describe one of these technical terms.
In the space provided, indicate the accounting term described, or answer "none" if the
statement does not correctly describe any of the terms.
(a) _______ is the amount by which operating earnings exceeds a minimum acceptable
return on the average invested capital. The minimum rate of return represents the
opportunity cost of using the invested capital.
(b) ______ is the operating income divided by the average invested capital associated with
the generation of that income.
(c) _______ is computed by dividing the operating income by the total sales for a particular
business segment or product line. It tells managers the amount of earnings generated from
a dollar of sales.
(d) _______ give an employee the right to purchase a pre-specified number of shares at a
pre-specified price within a certain future time period. They provide incentives for
managers to increase stock prices.
(e) _______ is the set of activities necessary to create and distribute a desirable product or
service to a customer.
(f) _______ is a specific type of residual income. It is computed by multiplying weighted
average cost of capital by total assets minus current liabilities, and subtracting that
product from the after-tax operating income.
(g) _______ is a measure created by dividing sales by the average invested capital to
generate those sales. It tells managers the amount of sales generated by a dollar of
invested capital.
(h) _______ is a system for performance measurement that links a company's strategy to
specific goals, assesses progress towards those goals, and measures specific initiatives to
achieve those goals. It is a systematic attempt to create a business performance
measurement process that integrates objectives across four business lenses to achieve the
organization's strategic goals.
55.
Define the measurement model known as the DuPont system used for evaluating business
performance.
56.
The following information regarding the Duncan Company is available:
Compute the answers for items A-D.
57.
The following information is available for the Hancock Company.
Compute the answers for items A-D.
58.
Identify the criticisms of using ROI (Return on investment) as the only performance
measure.
59.
Calculate and explain residual income and economic value added.
60.
How is the balanced scorecard used to identify, evaluate, and reward business
performance?
61.
Explain the importance of incentive systems for motivating performance.
62.
Identify and explain the components of management compensation and the tradeoffs that
compensation designers make.
