Managerial Accounting, 3e (Braun/Tietz) Chapter 10 Performance Evaluation

1) There are two types of responsibility centers. Answer: FALSE Diff: 1 LO: 10-1 EO : S10-1 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% () "esponsibility acco&ntin% perfor'ance reports co'pare b&)%ets with act&al res&lts for each responsibility center. Answer: T"*E Diff: 1 LO: 10-1 EO : S10-1 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% +) ,oal con%r&ence is a syste' for e#al&atin% the perfor'ance of each responsibility center an) its 'ana%er. Answer: FALSE Diff: 1 LO: 10-1 EO : S10-1 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% -) A profit center is a responsibility center in which a 'ana%er is acco&ntable for costs only. Answer: FALSE Diff: 1 LO: 10-1 EO : S10-1 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% .) /ro)&ct lines are %enerally consi)ere) profit centers. Answer: T"*E Diff: 1 LO: 10-1 EO : S10-1 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin%

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4) 5ost co'panies consi)er )i#isions to be in#est'ent centers. Answer: T"*E Diff: 1 LO: 10-1 EO : S10-1 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 6) 5ana%e'ent by e7ception )irects 'ana%e'ent8s attention to i'portant )ifferences between act&al an) b&)%ete) a'o&nts. Answer: T"*E Diff: 1 LO: 10-1 EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 9) 2n#esti%atin% si%nificant #ariances fro' a b&)%et to assi%n responsibility is an e7a'ple of 'ana%e'ent by e7ception. Answer: T"*E Diff: 1 LO: 10-1 EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% :) S'all co'panies ten) to &se )ecentrali;e) )ecision 'a$in%. Answer: FALSE Diff: 1 LO: 10-1 EO : S10-+ AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 10) o'panies that )ecentrali;e split their operations into )ifferent )i#isions or operatin% &nits. Answer: T"*E Diff: 1 LO: 10-1 EO : S10-+ AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin%

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11) Decentrali;ation allows top 'ana%e'ent to concentrate on lon%-ter' strate%ic plannin%. Answer: T"*E Diff: 1 LO: 10-1 EO : S10-+ AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 1() Decentrali;ation allows top 'ana%e'ent to hire wor$ers with e7pert $nowle)%e for each b&siness &nit. Answer: T"*E Diff: ( LO: 10-1 EO : S10-+ AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 1+) Decentrali;ation 'ay )&plicate a co'pany8s costs since each b&siness &nit 'ay1 for e7a'ple1 ha#e its own p&rchasin% )epart'ent. Answer: T"*E Diff: ( LO: 10-1 EO : S10-+ AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 1-) ,oal incon%r&ence fre<&ently e7ists in )ecentrali;e) or%ani;ations. Answer: T"*E Diff: 1 LO: 10-1 EO : S10-+ AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 1.) D&plication of costs is a )isa)#anta%e of )ecentrali;e) or%ani;ations. Answer: T"*E Diff: 1 LO: 10-1 EO : S10-+ AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin%

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14) The acco&ntin% )epart'ent for a con#enience store chain is li$ely to be consi)ere) a cost center. Answer: T"*E Diff: 1 LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 16) The local !&r%er =in% resta&rant is li$ely to be consi)ere) to be a re#en&e center. Answer: FALSE Diff: 1 LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 19) ,oal con%r&ence is 'ore li$ely to be achie#e) at a centrali;e) or%ani;ation rather than a )ecentrali;e) or%ani;ation. Answer: T"*E Diff: 1 LO: 10-1 EO : S10-+ AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 1:) 2n a>n) ???????? center1 'ana%ers are acco&ntable for both re#en&es an) costs. A) cost !) profit ) e<&ity D) in#est'ent Answer: ! Diff: 1 LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% (0) All of the followin% are responsibility centers except A) cost center. !) profit center. ) in#est'ent center. D) e<&ity center. Answer: D Diff: 1 LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% (1) A 'ana%er is only acco&ntable for e7penses in a>n) ???????? center. A) cost !) re#en&e ) profit D) in#est'ent Answer: A Diff: 1 LO: 10-1
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EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% (() The s&ccess of a>n) ???????? is 'eas&re) not only by its inco'e1 b&t also by relatin% that inco'e to its in#este) capital. A) cost center !) in#est'ent center ) profit center D) re#en&e center Answer: ! Diff: 1 LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% (+) 5ana%e'ent by ???????? is the practice of )irectin% e7ec&ti#e attention to i'portant )e#iations fro' b&)%ete) a'o&nts. A) control !) ob@ecti#e ) e7ception D) analysis Answer: Diff: 1 LO: 10-1 EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin%

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(-) Ahich ter' below best fits Ba part1 se%'ent1 or s&b&nit of a co'pany whose 'ana%er is acco&ntable for specifie) acti#itiesBC A) Operatin% b&)%et !) 5aster b&)%et ) Sensiti#ity analysis D) "esponsibility center Answer: D Diff: 1 LO: 10-1 EO : S10-1 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% (.) The h&'an reso&rces )epart'ent for =ohl8s Depart'ent Stores wo&l) 'ost li$ely be classifie) as a>n) A) cost center. !) in#est'ent center. ) profit center. D) re#en&e center. Answer: A Diff: 1 LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% (4) Troy o'pany b&)%ete) D1( 'illion for c&sto'er ser#ice costs1 b&t act&ally spent only D10 'illion. Ahich of the followin% state'ents is the best co&rse of action for 'ana%e'ent to ta$e in this instanceC A) 5ana%e'ent will in#esti%ate this D( 'illion fa#orable #ariance to ens&re that the cost sa#in%s )o not reflect s$i'pin% on c&sto'er ser#ice. !) !eca&se this D( 'illion #ariance is fa#orable1 'ana%e'ent )oes not nee) to in#esti%ate f&rther. ) 5ana%e'ent will in#esti%ate this D( 'illion &nfa#orable #ariance to try to i)entify an) correct the proble'. D) 5ana%e'ent sho&l) not in#esti%ate e#ery 'a@or #ariance1 especially the &nfa#orable ones. Answer: A Diff: 1 LO: 10-1 EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin%

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(6) 2nfor'ation technolo%y has 'a)e 'any tas$s easier1 b&t not all tas$s. Ahich of the followin% tas$s perfor'e) by 'ana%ers re<&ires 'ore critical thin$in% s$ills than the others beca&se it is not as )epen)ent &pon infor'ation technolo%yC A) Sensiti#ity analysis !) Analy;in% an) in#esti%atin% the root ca&ses of #ariances in responsibility center reports ) "ollin% &p in)i#i)&al &nits8 b&)%ets into the co'panywi)e b&)%et D) /reparin% responsibility center perfor'ance reports that i)entify #ariances between act&al an) b&)%ete) re#en&es an) costs Answer: ! Diff: 1 LO: 10-1 EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% (9) Ahich of the followin% is a )isa)#anta%e of )ecentrali;ationC A) *nit 'ana%ers 'ay not &n)erstan) the bi% pict&re of the co'pany. !) 5ana%e'ent )oes not ha#e ti'e to concentrate on lon%-ter' strate%ic plannin%. ) *nit 'ana%ers ha#e )ecrease) 'oti#ation an) retention. D) 5ana%ers recei#e trainin% an) e7perience to allow a)#ance'ent in the or%ani;ation. Answer: A Diff: 1 LO: 10-1 EO : S10-+ AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% (:) The 'aintenance )epart'ent at ontinental Airlines is li$ely to be classifie) as a>n) A) cost center. !) in#est'ent center. ) profit center. D) re#en&e center. Answer: A Diff: ( LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin%

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+0) The sec&rity )epart'ent for a )epart'ent store chain is li$ely to be classifie) as a>n) A) cost center. !) in#est'ent center. ) profit center. D) re#en&e center. Answer: A Diff: ( LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% +1) L&bri;ol is a che'ical co'pany that speciali;es in pro)&cin% l&bricants. L&bri;ol was ac<&ire) in (011 for D: billion by in#est'ent hol)in% co'pany !er$shire 3athaway. L&bri;ol is li$ely to be classifie) as a>n) A) cost center. !) in#est'ent center. ) profit center. D) re#en&e center. Answer: ! Diff: ( LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% +() The reser#ations )epart'ent for a car rental chain is li$ely to be classifie) as a>n) A) cost center. !) in#est'ent center. ) profit center. D) re#en&e center. Answer: D Diff: ( LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin%

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++) The con#enience store owne) by a national con#enience store chain is li$ely to be classifie) as a>n) A) cost center. !) in#est'ent center. ) re#en&e center. D) profit center. Answer: D Diff: ( LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% +-) An a'&se'ent par$8s %a'es )epart'ent which reports re#en&es an) e7penses is li$ely to be classifie) as a>n) A) profit center. !) in#est'ent center. ) cost center. D) re#en&e center. Answer: A Diff: ( LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% +.) The h&'an reso&rces )epart'ent for a steel 'an&fact&rer is li$ely to be classifie) as a>n) A) in#est'ent center. !) cost center. ) profit center. D) re#en&e center. Answer: ! Diff: ( LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% +4) A potential )isa)#anta%e of )ecentrali;ation is which of the followin%C A) !ench'ar$in% !) /ro#i)es trainin% ) /ro#i)es fee)bac$ D) D&plication of costs Answer: D Diff: ( LO: 10-1 EO : S10-+ AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% +6) A potential a)#anta%e of )ecentrali;ation is which of the followin%C A) !ench'ar$in% !) /ro'otes %oal con%r&ence an) coor)ination ) /ro#i)es trainin% D) /ro#i)es fee)bac$ Answer: Diff: ( LO: 10-1 EO : S10-+
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AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% +9) The rest )i#ision of /rocter E ,a'ble is 'ost li$ely treate) as a>n) A) in#est'ent center. !) cost center. ) profit center. D) re#en&e center. Answer: A Diff: ( LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% +:) /i;;a 3&t1 a )i#ision of F&'G !ran)s1 is 'ost li$ely treate) as a>n) A) cost center. !) in#est'ent center. ) profit center. D) re#en&e center. Answer: ! Diff: ( LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% -0) The pro)&ction line at 5ornin%star Far's is 'ost li$ely treate) as a>n) A) in#est'ent center. !) cost center. ) profit center. D) re#en&e center. Answer: ! Diff: ( LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% -1) 3on)a8s East Liberty A&to /lant where 3on)a cars are b&ilt is 'ost li$ely treate) as a>n) A) cost center. !) in#est'ent center. ) profit center. D) re#en&e center. Answer: A Diff: ( LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% -() The central reser#ation office at 5e%a!&s is 'ost li$ely treate) as a>n) A) cost center. !) in#est'ent center. ) re#en&e center. D) profit center. Answer:
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Diff: ( LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% -+) The re%ional sales )epart'ent for Hero7 copiers is 'ost li$ely treate) as a>n) A) cost center. !) in#est'ent center. ) profit center. D) re#en&e center. Answer: D Diff: ( LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% --) A pro)&ct line at /epsi o >s&ch as the /epsi 5a7 pro)&ct line) is 'ost li$ely treate) as a>n) A) cost center. !) profit center. ) in#est'ent center. D) re#en&e center. Answer: ! Diff: ( LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% -.) The orn Fla$es pro)&ct line at =ello%% is 'ost li$ely treate) as a>n) A) cost center. !) in#est'ent center. ) profit center. D) re#en&e center. Answer: Diff: ( LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% -4) The 'ana%er of the Iortheast sales re%ion at ,eneral 5ills wo&l) be in char%e of a>n) A) cost center. !) in#est'ent center. ) re#en&e center. D) profit center. Answer: Diff: 1 LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% -6) The s&bscription sales 'ana%er for The Iew For$ Ti'es wo&l) be in char%e of a>n) A) cost center. !) in#est'ent center.
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) profit center. D) re#en&e center. Answer: D Diff: 1 LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% -9) The 'ana%er of the corporate )i#ision of Anthropolo%ie >a retail clothin% chain) wo&l) be in char%e of a>n) A) in#est'ent center. !) cost center. ) profit center. D) re#en&e center. Answer: A Diff: 1 LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% -:) The EO of !anana "ep&blic1 a )i#ision of The ,ap1 2nc. wo&l) be in char%e of a>n) A) cost center. !) in#est'ent center. ) profit center. D) re#en&e center. Answer: ! Diff: 1 LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% .0) The 'ana%er of a local JS )r&%store wo&l) be in char%e of a>n) A) cost center. !) in#est'ent center. ) re#en&e center. D) profit center. Answer: D Diff: 1 LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% .1) The store 'ana%er for the Dic$8s Sportin% ,oo)s location in ol&'b&s1 Ohio1 is in char%e of a>n) A) cost center. !) in#est'ent center. ) profit center. D) re#en&e center. Answer: Diff: 1 LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin%
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.() The 'ana%er of the acco&ntin% )epart'ent at A)i)as wo&l) be in char%e of a>n) A) in#est'ent center. !) cost center. ) profit center. D) re#en&e center. Answer: ! Diff: 1 LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% .+) The 'ana%er of the tr&c$ 'aintenance )epart'ent at Fe)E7 wo&l) be in char%e of a>n) A) cost center. !) in#est'ent center. ) profit center. D) re#en&e center. Answer: A Diff: 1 LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% .-) The 'ana%er of the Aalt Disney Aorl) St&)ios >a corporate )i#ision) wo&l) be in char%e of a>n) A) in#est'ent center. !) cost center. ) profit center. D) re#en&e center. Answer: A Diff: 1 LO: 10-1 EO : E10-16 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% ..) Describe the fo&r types of responsibility centers. ,i#e a specific e7a'ple of each of the fo&r types of responsibility centers. Answer: 1. ost center: 2n a cost center1 'ana%ers are acco&ntable for costs only. (. "e#en&e center: 2n a re#en&e center1 'ana%ers are acco&ntable pri'arily for re#en&es. 5any ti'es1 re#en&e centers are sales territories. +. /rofit center: 2n a profit center1 'ana%ers are acco&ntable for both re#en&es an) costs an)1 therefore1 profits. -. 2n#est'ent center: 2n an in#est'ent center1 'ana%ers are acco&ntable for in#est'ents1 re#en&es1 an) costs. 2n#est'ent centers are %enerally lar%e )i#isions of a corporation. St&)ent e7a'ples will #ary. Diff: ( LO: 10-1 EO : S10-1 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin%

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.4) List an) )escribe reasons why a co'pany 'i%ht choose to )ecentrali;e. Answer: 1. Frees top 'ana%e'ent8s ti'eKby )ele%atin% responsibility for )aily operations to &nit 'ana%ers1 top 'ana%e'ent can concentrate on lon%-ter' strate%ic plannin% an) hi%her-le#el )ecisions that affect the entire co'pany. (. S&pports &se of e7pert $nowle)%eK)ecentrali;ation allows top 'ana%e'ent to hire the e7pertise each b&siness &nit nee)s to e7cel in its specific operations. +. 2'pro#es c&sto'er relationsK&nit 'ana%ers foc&s on @&st one se%'ent of the co'panyL therefore1 they can 'aintain close contact with i'portant c&sto'ers. -. /ro#i)es trainin%K)ecentrali;ation also pro#i)es &nit 'ana%ers with trainin% an) e7perience necessary to beco'e effecti#e top 'ana%ers. .. 2'pro#es 'oti#ation an) retentionKe'powerin% &nit 'ana%ers to 'a$e )ecisions increases 'ana%ers8 'oti#ation an) retention an) i'pro#es @ob perfor'ance an) satisfaction. Diff: 1 LO: 10-1 EO : S10-+ AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% .6) Disc&ss potential proble's associate) with )ecentrali;ation. Answer: 1. D&plication of costsK)ecentrali;ation 'ay ca&se the co'pany to )&plicate certain costs or assets. (. /roble's achie#in% %oal con%r&enceK%oal con%r&ence occ&rs when &nit 'ana%ers8 %oals ali%n with top 'ana%e'ent8s %oals. Decentrali;e) co'panies often str&%%le to achie#e %oal con%r&ence. *nit 'ana%ers 'ay not f&lly &n)erstan) the bi% pict&re of the co'pany. Diff: 1 LO: 10-1 EO : S10-+ AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% .9) "esponsibility acco&ntin% perfor'ance reports capt&re the financial perfor'ance of cost1 re#en&e an) profit centers. Answer: T"*E Diff: 1 LO: 10-( EO : E1-19 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% .:) A perfor'ance report co'pares expecte re#en&es an) e7penses a%ainst bu !ete fi%&res for each responsibility center. Answer: FALSE Diff: 1 LO: 10-( EO : E10-(6 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 40) The )ifference between act&al res&lts an) b&)%ete) a'o&nts is calle) )ecentrali;ation. Answer: FALSE Diff: ( LO: 10-( EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin%
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41) ost center perfor'ance reports typically foc&s on the static b&)%et #ariance. Answer: FALSE Diff: ( LO: 10-( EO : E10-(6 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 4() 5ana%e'ent by e7ception is &se) to )eter'ine which #ariances to in#esti%ate. Answer: T"*E Diff: ( LO: 10-( EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 4+) "e#en&e center perfor'ance reports are reports that list #ariances. Answer: T"*E Diff: ( LO: 10-( EO : E10-(6 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 4-) 5ana%e'ent by e7ception sa#es 'ana%e'ent ti'e by )ictatin% that 'ana%ers pay attention to only &nfa#orable #ariances. Answer: FALSE Diff: 1 LO: 10-( EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 4.) A profit center will show re#en&es an) costs. Answer: T"*E Diff: 1 LO: 10-( EO : E10-(6 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 44) All fa#orable #ariances are in#esti%ate) when &sin% 'ana%e'ent by e7ception. Answer: FALSE Diff: 1 LO: 10-( EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 46) Ahich type of #ariance ca&ses operatin% inco'e to be lower than b&)%ete)C A) Fa#orable #ariance !) Ie&tral #ariance ) *nfa#orable #ariance D) "e#erse #ariance Answer: Diff: ( LO: 10-(
1. opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 49) 5ana%e'ent by e7ception wo&l) )ictate that the 'ana%er in#esti%ate which of the followin% #ariancesC A) Jariances which are less than a certain )ollar a'o&nt or percenta%e !) Jariances which are %reater than a certain )ollar a'o&nt or percenta%e ) All &nfa#orable #ariances D) All fa#orable an) &nfa#orable #ariances Answer: ! Diff: ( LO: 10-( EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 4:) The perfor'ance report for a ???????? wo&l) typically incl&)e re#en&es an) costs. A) cost center !) sales center ) profit center D) re#en&e center Answer: Diff: ( LO: 10-( EO : E10-(6 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin%

14 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

60) A perfor'ance report for a ???????? co'pares only act&al re#en&es an) b&)%ete) re#en&es. A) re#en&e center !) cost center ) in#est'ent center D) All of the abo#e Answer: A Diff: ( LO: 10-( EO : E10-(6 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 61) Aith ????????1 'ana%ers loo$ at the si;e of the #ariances between act&al res&lts an) b&)%ete) a'o&nts in or)er to )eter'ine which #ariances sho&l) be in#esti%ate). A) 'ana%e'ent by #ariance !) 'ana%e'ent by b&)%et ) 'ana%e'ent by )ecision D) 'ana%e'ent by e7ception Answer: D Diff: ( LO: 10-( EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 6() The ???????? is the )ifference in )ollars between a'o&nts in the static b&)%et an) the fle7ible b&)%et. A) fle7ible b&)%et #ariance !) static b&)%et #ariance ) sales #ol&'e #ariance D) act&al #ariance Answer: Diff: ( LO: 10-( EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin%

16 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

6+) Ahich of the followin% ca&ses the )ifference between a'o&nts in the static b&)%et an) the fle7ible b&)%et for a re#en&e centerC A) The cost of sales !) The n&'ber of &nits sol) )iffers fro' planne) sales le#els ) The sellin% price per &nit D) !oth the sellin% price an) the n&'ber of &nits sol) Answer: ! Diff: ( LO: 10-( EO : E10-(6 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 6-) Fa#orable sales #ol&'e #ariance for re#en&es is ca&se) by which of the followin%C A) Act&al net inco'e for the s&b&nit is %reater than b&)%ete) net inco'e. !) Act&al sales in )ollars are %reater than the 'aster b&)%et sales in )ollars. ) The fle7ible b&)%et sales in )ollars are %reater than the static b&)%et sales in )ollars. D) Act&al sales in )ollars are less than the static b&)%et sales in )ollars. Answer: Diff: ( LO: 10-( EO : E10-(6 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 6.) The perfor'ance e#al&ation of cost centers is typically base) on which of the followin%C A) Sales #ol&'e #ariance !) Fle7ible b&)%et #ariance ) "et&rn on in#est'ent >"O2) D) "et&rn on assets >"OA) Answer: ! Diff: ( LO: 10-( EO : E10-(6 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 64) The perfor'ance e#al&ation of a profit center is typically base) on its A) fle7ible b&)%et #ariance. !) static b&)%et #ariance. ) ret&rn on in#est'ent. D) ret&rn on assets. Answer: A Diff: ( LO: 10-( EO : E10-(6 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 66) "i)er o'pany ha) the followin% financial res&lts for last 'onth. Ahich type of responsibility center )o these financial res&lts reflectC Fle7ible !&)%et Jariance M of Jariance Act&al Fle7ible !&)%et >* or F) >* or F) D +01000 D (91000 D (1000 * 6.1-M * 1.1000 1-1000 11000 * 6.1-M *
19 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

,ret;el S&b&nit Direct 'aterials Direct labor

2n)irect labor *tilities Depreciation "epairs an) 5aintenance Total

(.1000 1(1000 (.1000 -1000 D1111000

((1000 101000 (.1000 .1000 D10-1000

+1000 * (1000 * 0 11000 F D 61000 *

1+.4-M * (0.0M * 0 (0.00M F 4.6+M *

A) ost center !) /rofit center ) 2n#est'ent center D) "e#en&e center Answer: A Diff: + LO: 10-( EO : E10-(6 AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin%

1: opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

69) orbin o'pany ha) the followin% financial res&lts for last 'onth. Ahat type of responsibility center )o these financial res&lts reflectC Fle7ible !&)%et Jariance M of Jariance Act&al Fle7ible !&)%et >* or F) >* or F) D((01000 D(001000 D (01000 F 10.00M F 901000 601000 101000 * 1-.(:M * 1-01000 -01000 1001000 1+01000 -01000 :01000 101000 F 0 101000 F 6.4:M F 0 11.11M F

One store "e#en&es Operatin% E7penses 2nco'e fro' operations before ser#ice )ept. char%es Ser#ice )epart'ent char%es 2nco'e fro' operations

A) "e#en&e center !) 2n#est'ent center ) /rofit center D) ost Answer: Diff: + LO: 10-( EO : E10-(6 AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 6:) Elaina o'pany ha) the followin% financial res&lts for last 'onth. Ahat type of responsibility center )o these res&lts reflectC Selle o. N S&b&nit H "e#en&e by /ro)&ct AD--0 AD-40 AD-90 OD--0 OD-40 Total Fle7ible !&)%et Jariance D 101000 F +01000 * .1000 * (.1000 F .1000 F D .1000 F Sales Jol&'e Jariance D (01000 F -01000 F 101000 * -01000 * (01000 F D +01000 F Static >5aster) !&)%et D 4001000 .101000 1-01000 (-01000 -001000 D119:01000

Act&al D 4+01000 .(01000 1(.1000 ((.1000 -(.1000 D11:(.1000

Fle7ible !&)%et D 4(01000 ..01000 1+01000 (001000 -(01000 D11:(01000

A) /rofit center !) "e#en&e center ) 2n#est'ent center D) ost center Answer: ! Diff: + LO: 10-( EO : E10-(6 AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 90) The )&ties of an in#est'ent center 'ana%er are si'ilar to those of a FO. Answer: FALSE Diff: ( LO: 10-+ EO : S10-1 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin%
(0 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

91) The )&ties of an in#est'ent center 'ana%er are si'ilar to those of a EO. Answer: T"*E Diff: ( LO: 10-+ EO : S10-1 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 9() o'panies e#al&ate in#est'ent center perfor'ance the way they e#al&ate profit center perfor'ance. Answer: FALSE Diff: ( LO: 10-+ EO : S10-1 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss responsibility acco&ntin% 9+) "et&rn on 2n#est'ent >"O2) is )efine) as operatin% inco'e )i#i)e) by c&rrent assets. Answer: FALSE Diff: ( LO: 10-+ EO : S10-6 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 9-) The capital t&rno#er is operatin% inco'e )i#i)e) by sales. Answer: FALSE Diff: ( LO: 10-+ EO : E10-(1 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

(1 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

9.) "esi)&al 2nco'e >"2) e<&als operatin% inco'e less 'ini'&' acceptable inco'e. Answer: T"*E Diff: ( LO: 10-+ EO : S10-: AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 94) Sales 'ar%in is a co'ponent of the "et&rn on 2n#est'ent >"O2) calc&lation. Answer: T"*E Diff: ( LO: 10-+ EO : E10-(+ AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 96) The wei%hte) a#era%e cost of capital is a co'ponent of the "et&rn on 2n#est'ent >"O2) calc&lation. Answer: FALSE Diff: ( LO: 10-+ EO : E10-(+ AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 99) Total assets is &se) in the )eno'inator when calc&latin% "O2. Answer: T"*E Diff: 1 LO: 10-+ EO : S10-6 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 9:) Sales 'ar%in is calc&late) as operatin% inco'e )i#i)e) by sales. Answer: T"*E Diff: 1 LO: 10-+ EO : S10-9 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

(( opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

:0) apital t&rno#er is calc&late) as operatin% inco'e )i#i)e) by total assets. Answer: FALSE Diff: 1 LO: 10-+ EO : E10-(+ AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s :1) The &se of ret&rn on in#est'ent >"O2) as a perfor'ance 'eas&re 'ay lea) 'ana%ers to re@ect pro@ects that wo&l) be profitable for the co'pany as a whole. Answer: T"*E Diff: 1 LO: 10-+ EO : S10-6 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s :() "esi)&al inco'e is the )ifference between re#en&es an) e7penses. Answer: FALSE Diff: 1 LO: 10-+ EO : S10-: AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s :+) Ahat will happen to ret&rn on in#est'ent >"O2) if c&rrent assets )ecrease while e#erythin% else re'ains the sa'eC A) "O2 will )ecrease. !) "O2 will increase. ) "O2 will not be affecte). D) Ae cannot )eter'ine the )irection of the effect fro' the infor'ation pro#i)e). Answer: ! Diff: ( LO: 10-+ EO : E10-(1 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

(+ opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

:-) 2f sellin% an) a)'inistrati#e e7penses )ecrease while e#erythin% else re'ains the sa'e1 what will happen to ret&rn on in#est'ent >"O2)C A) "O2 will )ecrease. !) "O2 will increase. ) "O2 will not be affecte). D) Ae cannot )eter'ine the )irection of the effect fro' the infor'ation pro#i)e). Answer: ! Diff: ( LO: 10-+ EO : E10-(1 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s :.) 2f a co'pany '&st )ecrease its sellin% price while all of the co'pany8s e7penses re'ain constant1 what will happen to ret&rn on in#est'ent >"O2)C A) "O2 will )ecrease. !) "O2 will increase. ) "O2 will not be affecte). D) Ae cannot )eter'ine the effect fro' the infor'ation pro#i)e). Answer: A Diff: ( LO: 10-+ EO : E10-(1 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s :4) *sin% ???????? 'ay ca&se a 'ana%er to re@ect a pro@ect that wo&l) be profitable for the co'pany as a whole. A) operatin% inco'e !) resi)&al inco'e ) "O2 D) EJA Answer: Diff: ( LO: 10-+ EO : E10-(1 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

(opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

:6) A 'ana%er can increase ret&rn on in#est'ent >"O2) by )oin% which of the followin%C A) 2ncrease operatin% e7penses !) 2ncrease operatin% assets ) Decrease sales D) Decrease operatin% e7penses Answer: D Diff: ( LO: 10-+ EO : E10-(1 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s :9) Ahich of the followin% financial perfor'ance 'eas&res can be &se) to co'pare potential pro@ects of )ifferent si;esC A) "O2 !) "esi)&al inco'e ) Sales re#en&e D) Operatin% inco'e Answer: A Diff: ( LO: 10-+ EO : E10-(1 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

(. opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

::) Ass&'e the Air on)itionin% )i#ision of the ,eneral Appliance orporation ha) the followin% res&lts last year >in tho&san)s). 5ana%e'ent8s tar%et rate of ret&rn is 1.M an) the wei%hte) a#era%e cost of capital is 10M. 2ts effecti#e ta7 rate is +.M. Sales Operatin% inco'e Total assets &rrent liabilities D 1010001000 (10001000 (1.00000 9(01000

Ahat is the )i#ision8s sales 'ar%inC A) 90.00M !) +(.90M ) (0.00M D) -00.00M Answer: E7planation: ) Operatin% inco'e D(10001000PSales D 1010001000 Q (0M Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 100) Ass&'e the Air on)itionin% )i#ision of the ,eneral Appliance orporation ha) the followin% res&lts last year >in tho&san)s). 5ana%e'ent8s tar%et rate of ret&rn is 1.M an) the wei%hte) a#era%e cost of capital is 10M. 2ts effecti#e ta7 rate is +.M. Sales Operatin% inco'e Total assets &rrent liabilities D 1010001000 (10001000 (1.00000 9(01000

Ahat is the )i#ision8s capital t&rno#erC A) ..00 !) -.00 ) 1.(. D) +.0. Answer: ! E7planation: !) Sales D 1010001000PTotal assets (1.001000 Q -.00 Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

(4 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

101) Ass&'e the Air on)itionin% )i#ision of the ,eneral Appliance orporation ha) the followin% res&lts last year >in tho&san)s). 5ana%e'ent8s tar%et rate of ret&rn is 1.M an) the wei%hte) a#era%e cost of capital is 10M. 2ts effecti#e ta7 rate is +.M. Sales Operatin% inco'e Total assets &rrent liabilities D 1010001000 (10001000 (1.00000 9(01000

Ahat is the )i#ision8s "et&rn on 2n#est'ent >"O2)C A) -00.00M !) (0.00M ) 90.00M D) +(.90M Answer: E7planation: ) Operatin% inco'e (10001000PTotal assets (1.001000 Q 90M Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

(6 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

10() Ass&'e the Air on)itionin% )i#ision of the ,eneral Appliance orporation ha) the followin% res&lts last year >in tho&san)s). 5ana%e'ent8s tar%et rate of ret&rn is 1.M an) the wei%hte) a#era%e cost of capital is 10M. 2ts effecti#e ta7 rate is +.M. Sales Operatin% inco'e Total assets &rrent liabilities D 1010001000 (10001000 (1.00000 9(01000

Ahat is the )i#ision8s "esi)&al 2nco'e >"2)C A) D114(.1000 !) D111+(1+4) D116.01000 D) D.001000 Answer: A E7planation: A) Operatin% inco'e (10001000 Less 5ini'&' acceptable inco'e Tar%et rate of ret&rn 1.M Total assets R (1.001000 >+6.1000) "esi)&al 2nco'e 114(.1000 Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

(9 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

10+) "in%o orporation ha) the followin% res&lts last year >in tho&san)s). 5ana%e'ent8s tar%et rate of ret&rn is 1.M an) the wei%hte) a#era%e cost of capital is 10M. 2ts effecti#e ta7 rate is +.M. Sales Operatin% inco'e Total assets &rrent liabilities D (010001000 -10001000 910001000 -19(01000

Ahat is the )i#ision8s "et&rn on 2n#est'ent >"O2)C A) .00.00M !) (0.00M ) .0.00M D) +(.90M Answer: E7planation: ) Operatin% inco'e -10001000PTotal assets 910001000 Q .0M Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 10-) The !o7 5an&fact&rin% Di#ision of the Allie) /aper o'pany reporte) the followin% res&lts fro' the past year. Sharehol)ers re<&ire a ret&rn of 6M. 5ana%e'ent calc&late) a wei%hte)-a#era%e cost of capital >AA ) of .M. Allie)8s corporate ta7 rate is +0M. Sales Operatin% inco'e Total assets &rrent liabilities D 6001000 D16.1000 D11.00000 4001000

Ahat is the )i#ision8s sales 'ar%inC A) (..00M !) -4.46M ) 11.46M D) -0.00M Answer: A E7planation: A) Operatin% inco'e D16.1000 P Sales D 6001000 Q (.M Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

(: opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

10.) The !o7 5an&fact&rin% Di#ision of the Allie) /aper o'pany reporte) the followin% res&lts fro' the past year. Sharehol)ers re<&ire a ret&rn of 6M. 5ana%e'ent calc&late) a wei%hte)-a#era%e cost of capital >AA ) of .M. Allie)8s corporate ta7 rate is +0M. Sales Operatin% inco'e Total assets &rrent liabilities D 6001000 D16.1000 D11.00000 4001000

Ahat is the )i#ision8s capital t&rno#erC A) 0.-6 !) -.00 ) 9..6 D) (1.0 Answer: A E7planation: A) Sales D 6001000 P Total assets 11.001000 Q 0.-6 Diff: ( LO: 10-+ EO : E10-(1 AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 104) The !o7 5an&fact&rin% Di#ision of the Allie) /aper o'pany reporte) the followin% res&lts fro' the past year. Sharehol)ers re<&ire a ret&rn of 6M. 5ana%e'ent calc&late) a wei%hte)-a#era%e cost of capital >AA ) of .M. Allie)8s corporate ta7 rate is +0M. Sales Operatin% inco'e Total assets &rrent liabilities D 6001000 D16.1000 D11.00000 4001000

Ahat is the )i#ision8s "et&rn on 2n#est'ent >"O2)C A) (..00M !) 11.46M ) -0.00M D) -4.46M Answer: ! E7planation: !) Operatin% inco'e 16.1000 P Total assets 11.001000 Q 11.46M Diff: ( LO: 10-+ EO : E10-(1 AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

+0 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

106) The !o7 5an&fact&rin% Di#ision of the Allie) /aper o'pany reporte) the followin% res&lts fro' the past year. Sharehol)ers re<&ire a ret&rn of 6M. 5ana%e'ent calc&late) a wei%hte)-a#era%e cost of capital >AA ) of .M. Allie)8s corporate ta7 rate is +0M. Sales Operatin% inco'e Total assets &rrent liabilities D 6001000 D16.1000 D11.00000 4001000

Ahat is the )i#ision8s "esi)&al 2nco'e >"2)C A) D601000 !) D661.00 ) D1001000 D) 1(41000 Answer: A E7planation: A) Operatin% inco'e 16.1000 Less 5ini'&' acceptable inco'e Tar%et rate of ret&rn 6M Total assets R 11.001000 >10.1000) "esi)&al 2nco'e 601000 Diff: ( LO: 10-+ EO : E10-(1 AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

+1 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

109) The S&nny Di#ision of 5ia'i orporation reporte) the followin% res&lts fro' the past year. Sharehol)ers re<&ire a ret&rn of 10M. 5ana%e'ent calc&late) a wei%hte)-a#era%e cost of capital >AA ) of .M. S&nny8s corporate ta7 rate is +0M. Sales Operatin% inco'e Total assets &rrent liabilities D 6001000 D(.01000 D11.00000 4001000

Ahat is the )i#ision8s "esi)&al 2nco'e >"2)C A) D601000 !) D661.00 ) D1001000 D) D(.01000 Answer: E7planation: ) Operatin% inco'e (.01000 Less 5ini'&' acceptable inco'e Tar%et rate of ret&rn 10M Total assets R 11.001000 >1.01000) "esi)&al 2nco'e 1001000 Diff: ( LO: 10-+ EO : E10-(1 AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 10:) "ay'on) orporation has an "O2 of +1M1 total assets of D41+0010001 an) c&rrent liabilities of D9(01000. Ahat is "ay'on) orporation8s operatin% inco'eC A) D(.1(00 !) D(14-.1141 ) D(01+((1.91 D) D11:.+1000 Answer: D E7planation: D) Operatin% inco'e Q Total assets R "et&rn on 2n#est'ents 11:.+1000 Q 41+001000 R +1M Diff: ( LO: 10-+ EO : E10-(( AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

+( opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

110) a')en orporation has operatin% inco'e of D9610001 a sales 'ar%in of 1.M1 an) capital t&rno#er of (... The ret&rn on in#est'ent >"O2) for a')en orporation wo&l) be closest to A) 4M. !) +9M. ) 106M. D) (M. Answer: ! E7planation: !) Operatin% inco'ePSales 5ar%in Q Sales 961000P1.M Q .901000 SalesP apital T&rno#er Q Total Assets .901000P(.. Q (+(1000 Operatin% inco'ePTotal Assets Q "O2 961000P(+(1000 Q +9M Diff: ( LO: 10-+ EO : E10-(( AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 111) Ea%le o'pany has a sales 'ar%in of 1.M1 a tar%et rate of ret&rn of 1-M1 an) capital t&rno#er of (... 2ts operatin% inco'e is D961000. The sales in )ollars for Ea%le o'pany wo&l) be closest to A) D.901000. !) D+-1900. ) D1+10.0. D) D(161.00. Answer: A E7planation: A) Operatin% inco'e D 941000 Di#i)e by Di#i)e) by Sales 'ar%in Sales Diff: ( LO: 10-+ EO : E10-(( AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

++ opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

11() "ear)on Enterprises has operatin% inco'e of D:01000. 2ts ret&rn on in#est'ent >"O2) is -0M1 while its tar%et rate of ret&rn is 1.M. The total assets of "ear)on Enterprises wo&l) be closest to A) D+41000. !) D4(11-(:. ) D((.1000. D) D:01000. Answer: E7planation: ) Operatin% 2nco'ePTotal Assets Q "O2 D:01000PTotal Assets Q -0M D:01000P-0M Q D((.1000 Diff: ( LO: 10-+ EO : E10-(( AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 11+) Fern o'pany has a tar%et rate of ret&rn of 1-M1 an "O2 of +9M1 an) capital t&rno#er of (... The sales 'ar%in for Fern o'pany wo&l) be closest to A) 4M. !) 1.M. ) :.M. D) +.M. Answer: ! E7planation: !) apital T&rno#er Q SalesPTotal Assets (.. Q SalesPTotal Assets (.. Total Assets Q Sales "O2 Q Operatin% inco'ePTotal Assets +9M Q Operatin% inco'ePTotal Assets .+9 Total Assets Q Operatin% inco'e Sales 'ar%in Q Operatin% inco'ePSales Sales 'ar%in Q .+9 Total assetsP(.. Total assets Sales 'ar%in Q .1. Diff: ( LO: 10-+ EO : E10-(( AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

+opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

11-) For the 'ost recent year1 "obin o'pany reports operatin% inco'e of D4.01000. "obin8s sales 'ar%in is 10M1 an) capital t&rno#er is (.0. Ahat is "obin8s ret&rn on in#est'ent >"O2)C A) .M !) 1M ) 100M D) (0M Answer: D E7planation: D) "O2 Q sales 'ar%in R capital t&rno#er (0M Q 10M R (.0 Diff: ( LO: 10-+ EO : E10-(( AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 11.) Do#e 2ncorporate) has operatin% inco'e of D4.010001 a sales 'ar%in of 10M1 an) a capital t&rno#er rate of (.0. Ahat a'o&nt wo&l) Do#e report for salesC A) D11+001000 !) D41.001000 ) D4.1000 D) D+(.1000 Answer: ! E7planation: !) Operatin% inco'e D 4.01000 Di#i)e by Di#i)e) by Sales 'ar%in Sales Diff: ( LO: 10-+ EO : E10-(( AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

+. opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

114) Ahat are the total assets reporte) by Sparrow Enterprises if operatin% inco'e is D4.010001 its ret&rn on in#est'ent >"O2) is -0M1 an) its tar%et rate of ret&rn is 10MC A) D(401000 !) D114(.1000 ) D41.001000 D) D4.01000 Answer: ! E7planation: !) Operatin% 2nco'ePTotal Assets Q "O2 4.01000PTotal Assets Q -0M 4.01000P-0M Q D114(.1000 Diff: ( LO: 10-+ EO : E10-(( AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 116) /i%eon For%es8 sta$ehol)ers re<&ire a 10M rate of ret&rn. The co'pany c&rrently has an "O2 of +6M an) a capital t&rno#er of (.0. Ahat is /i%eon8s sales 'ar%inC A) 6-.+M !) ..0M ) 19..M D) (0.0M Answer: E7planation: ) "O2 Q Sales 5ar%in R apital T&rno#er +6M Q Sales 5ar%in R (.0 19..M Q +6M P (.0 Diff: ( LO: 10-+ EO : E10-(( AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

+4 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

119) ,ol)en orporation has operatin% inco'e of D++410001 a sales 'ar%in of 14M1 an) capital t&rno#er of +.0. The ret&rn on in#est'ent >"O2) for ,ol)en orporation wo&l) be closest to A) .M. !) -9M. ) (M. D) 140M. Answer: ! E7planation: !) Sales 5ar%in R apital T&rno#er Q "O2 14M R + Q -9M Diff: ( LO: 10-+ EO : E10-(( AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 11:) =lee'an o'pany has a sales 'ar%in of 14M1 operatin% inco'e of D++410001 an) capital t&rno#er of +.0. The sales in )ollars for =lee'an o'pany wo&l) be closest to A) D +1640. !) D 1(1000. ) D110091000. D) D(11001000. Answer: D E7planation: D) Operatin% inco'e D ++41000 Di#i)e by Di#i)e by Sales 'ar%in 14M Sales D (11001000 Diff: ( LO: 10-+ EO : E10-(( AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

+6 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1(0) Lewis o'pany has operatin% inco'e of D++41000. 2ts ret&rn on in#est'ent >"O2) is -9M1 while its tar%et rate of ret&rn is 10M. The total assets of Lewis o'pany wo&l) be closest to A) D++1400. !) D+1+401000. ) D1411(90. D) D6001000. Answer: D E7planation: D) "O2 Q Operatin% inco'ePTotal assets Total assets Q Operatin% inco'eP"O2 Q ++41000P-9M Q 6001000 Diff: ( LO: 10-+ EO : E10-(( AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1(1) Da%ny Enterprises has a tar%et rate of ret&rn of 10M1 an "O2 of -9M1 an) capital t&rno#er of +.0. The sales 'ar%in for Da%ny Enterprises wo&l) be closest to A) 1--M. !) 14M. ) +M. D) +0M. Answer: ! E7planation: !) "et&rn on in#est'ent -9M Di#i)e by Di#i)e by apital t&rno#er + Sales 'ar%in 14M Diff: ( LO: 10-+ EO : E10-(( AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

+9 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1(() The Top 3at Di#ision of !lan)on8s Fine 5enswear ha) the followin% res&lts last year >in tho&san)s). Sales Operatin% inco'e Total assets &rrent liabilities D -1.001000 D 46.1000 D +10001000 D (.01000

5ana%e'ent8s tar%et rate of ret&rn is 1(M an) the wei%hte) a#era%e cost of capital is :M. Ahat is the Top 3at Di#ision8s sales 'ar%inC A) 1.0.00M !) ((..0M ) 1..00M D) ...4M Answer: E7planation: ) Sales 'ar%in Q Operatin% inco'ePSales Q 46.1000P-1.001000 Q 1. M Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1(+) The Top 3at Di#ision of !lan)on8s Fine 5enswear ha) the followin% res&lts last year >in tho&san)s). Sales Operatin% inco'e Total assets &rrent liabilities D -1.001000 D 46.1000 D +10001000 D (.01000

5ana%e'ent8s tar%et rate of ret&rn is 1(M an) the wei%hte) a#era%e cost of capital is :M. Ahat is the Top 3at Di#ision8s capital t&rno#erC A) 4.6 !) -.) 1.. D) 19.0 Answer: E7planation: ) apital t&rno#er Q SalesPTotal assets Q -1.001000P+10001000 Q 1.. Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1(-) The Top 3at Di#ision of !lan)on8s Fine 5enswear ha) the followin% res&lts last year >in tho&san)s). Sales Operatin% inco'e Total assets &rrent liabilities D -1.001000 D 46.1000 D +10001000 D (.01000
+: opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

5ana%e'ent8s tar%et rate of ret&rn is 1(M an) the wei%hte) a#era%e cost of capital is :M. Ahat is the Top 3at Di#ision8s "et&rn on 2n#est'ent >"O2)C A) ((..0M !) 1..00M ) 1.0.00M D) ...4M Answer: A E7planation: A) "O2 Q Operatin% inco'ePTotal assets Q 46.1000P+10001000 Q ((..M Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

-0 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1(.) The Top 3at Di#ision of !lan)on8s Fine 5enswear ha) the followin% res&lts last year >in tho&san)s). Sales Operatin% inco'e Total assets &rrent liabilities D -1.001000 D 46.1000 D +10001000 D (.01000

5ana%e'ent8s tar%et rate of ret&rn is 1(M an) the wei%hte) a#era%e cost of capital is :M. Ahat is the Top 3at Di#ision8s "esi)&al 2nco'e >"2)C A) D 1+.1000 !) D -0.1000 ) D ((.1000 D) D +1.1000 Answer: D E7planation: D) Tar%et "et&rn Q Total Assets R "e<&ire) "et&rn +401000 Q +10001000 R 1(M "esi)&al 2nco'e Q Operatin% 2nco'e - Tar%et "et&rn +1.1000 Q 46.1000 - +401000 Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

-1 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1(4) 2;;y Di#ision of 5arine !oats orporation ha) the followin% res&lts last year >in tho&san)s). Sales Operatin% inco'e Total assets &rrent liabilities D -1.001000 D 6001000 D -10001000 D (.01000

5ana%e'ent8s tar%et rate of ret&rn is 10M an) the wei%hte) a#era%e cost of capital is 9M. Ahat is the 2;;y Di#ision8s "esi)&al 2nco'e >"2)C A) D 601000 !) D -001000 ) D 6001000 D) D +001000 Answer: D E7planation: D) Tar%et "et&rn Q Total Assets R "e<&ire) "et&rn -001000 Q -10001000 R 10M "esi)&al 2nco'e Q Operatin% 2nco'e - Tar%et "et&rn +001000 Q 6001000 - -001000 Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

-( opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1(6) /en)ant /&blishin% reporte) the followin% res&lts for its Te7tboo$ Di#ision: Sales Operatin% inco'e Total assets &rrent liabilities D (1(001000 D --01000 D 111001000 D 110001000

/en)ant8s tar%et rate of ret&rn is 1.M an) the wei%hte) a#era%e cost of capital is 10M. 2ts effecti#e ta7 rate is +.M. Ahat is the Te7tboo$ Di#ision8s sales 'ar%inC A) (00.00M !) (0.00M ) -0.00M D) -..-.M Answer: ! E7planation: !) Sales 'ar%in Q Operatin% inco'e P Sales (0M Q --01000 P (1(001000 Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

-+ opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1(9) /en)ant /&blishin% reporte) the followin% res&lts for its Te7tboo$ Di#ision: Sales Operatin% inco'e Total assets &rrent liabilities D (1(001000 D --01000 D 111001000 D 110001000

/en)ant8s tar%et rate of ret&rn is 1.M an) the wei%hte) a#era%e cost of capital is 10M. 2ts effecti#e ta7 rate is +.M. Ahat is the Te7tboo$ Di#ision8s capital t&rno#erC A) (.( !) (.. ) ..0 D) (.0 Answer: D E7planation: D) apital t&rno#er Q Sales P Total assets (.0 Q (1(001000 P 111001000 Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

-opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1(:) /en)ant /&blishin% reporte) the followin% res&lts for its Te7tboo$ Di#ision: Sales Operatin% inco'e Total assets &rrent liabilities D (1(001000 D --01000 D 111001000 D 110001000

/en)ant8s tar%et rate of ret&rn is 1.M an) the wei%hte) a#era%e cost of capital is 10M. 2ts effecti#e ta7 rate is +.M. Ahat is the Te7tboo$ Di#ision8s "et&rn on 2n#est'ent >"O2)C A) (0.00M !) -..-.M ) -0.00M D) (00.00M Answer: E7planation: ) "O2 Q Operatin% inco'e P Total assets -0M Q --01000 P 111001000 Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

-. opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1+0) /en)ant /&blishin% reporte) the followin% res&lts for its Te7tboo$ Di#ision: Sales Operatin% inco'e Total assets &rrent liabilities D (1(001000 D --01000 D 111001000 D 110001000

/en)ant8s tar%et rate of ret&rn is 1.M an) the wei%hte) a#era%e cost of capital is 10M. 2ts effecti#e ta7 rate is +.M. Ahat is the Te7tboo$ Di#ision8s "esi)&al 2nco'e >"2)C A) D(6.1000 !) D(641000 ) D++01000 D) D1101000 Answer: A E7planation: A) Tar%et "et&rn Q Total Assets R "e<&ire) "et&rn 14.1000 Q 111001000 R 1.M "esi)&al 2nco'e Q Operatin% 2nco'e - Tar%et "et&rn (6.1000 Q --01000 - 14.1000 Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

-4 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1+1) "i#era /&blishin% reporte) the followin% res&lts for its Tra)e /aperbac$ Di#ision: Sales Operatin% inco'e Total assets &rrent liabilities D (1(001000 D 4001000 D 11(001000 D 110001000

"i#era8s tar%et rate of ret&rn is 1(M an) the wei%hte) a#era%e cost of capital is 10M. Ahat is the Tra)e /aperbac$ Di#ision8s "et&rn on 2n#est'ent >"O2)C A) (0.00M !) .0.00M ) -0.00M D) (00.00M Answer: ! Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1+() Selecte) financial )ata for The /ortlan) /orcelain Aor$s offee 5&% Di#ision is as follows: Sales Operatin% inco'e Total assets &rrent liabilities Tar%et rate of ret&rn Aei%hte) a#era%e cost of capital D (1+001000 D -1-1000 D 61916.0 D 1901000 10M 9M

Ahat is The /ortlan) /orcelain Aor$s offee 5&% Di#ision sales 'ar%inC A) .6.40M !) 19.00M ) +(0.00M D) 6.9+M Answer: ! E7planation: !) Sales 'ar%in Q Operatin% inco'ePSales Q -1-1000P(1+001000 Q 19M Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

-6 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1++) Selecte) financial )ata for The /ortlan) /orcelain Aor$s offee 5&% Di#ision is as follows: Sales Operatin% inco'e Total assets &rrent liabilities Tar%et rate of ret&rn Aei%hte) a#era%e cost of capital D (1+001000 D -1-1000 D 61916.0 D 1901000 10M 9M

Ahat is The /ortlan) /orcelain Aor$s offee 5&% Di#ision capital t&rno#erC A) ..4 !) 1(.9 ) +.( D) 1.6 Answer: E7planation: ) apital t&rno#er Q SalesPTotal assets Q (1+001000P61916.0 Q +.( Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1+-) Selecte) financial )ata for The /ortlan) /orcelain Aor$s offee 5&% Di#ision is as follows: Sales Operatin% inco'e Total assets &rrent liabilities Tar%et rate of ret&rn Aei%hte) a#era%e cost of capital D (1+001000 D -1-1000 D 61916.0 D 1901000 10M 9M

Ahat is The /ortlan) /orcelain Aor$s offee 5&% Di#ision ret&rn on in#est'entC A) .6.40M !) +(0.00M ) 19.00M D) 6.9+M Answer: A E7planation: A) "et&rn on in#est'ent Q Operatin% inco'ePTotal assets Q -1-1000P61916.0 Q .6.40M Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1+.) Selecte) financial )ata for The /ortlan) /orcelain Aor$s offee 5&% Di#ision is as follows: Sales Operatin% inco'e Total assets &rrent liabilities Tar%et rate of ret&rn D (1+001000 D -1-1000 D 61916.0 D 1901000 10M
-9 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

Aei%hte) a#era%e cost of capital

9M

Ahat is The /ortlan) /orcelain Aor$s offee 5&% Di#ision resi)&al inco'eC A) D+:41000 !) D61196. ) D+.41.00 D) D+-(11(. Answer: D E7planation: D) "esi)&al inco'e Q Operatin% inco'e - >Tar%et rate of ret&rnSTotal assets) Q -1-1000 - >10M S 61916.0) Q -1-1000 - 61196. Q +-(11(. Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

-: opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1+4) The followin% )ata relates to Lo%an Electric an) its Li%ht !&lb Di#ision. Li%ht !&lb Di#ision sales Li%ht !&lb Di#ision operatin% inco'e Li%ht !&lb Di#ision total assets Li%ht !&lb Di#ision c&rrent liabilities orporate tar%et rate of ret&rn orporate wei%hte) a#era%e cost of capital orporate effecti#e ta7 rate D 61.001000 D 6.01000 D +10001000 D ..01000 1.M 11M +.M

Ahat is the Li%ht !&lb Di#ision8s sales 'ar%inC A) (.0M !) 10M ) 19.++M D) (.M Answer: ! E7planation: !) Sales 'ar%in Q Operatin% inco'ePSales Q 6.01000P61.001000 Q 10M Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

.0 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1+6) The followin% )ata relates to Lo%an Electric an) its Li%ht !&lb Di#ision. Li%ht !&lb Di#ision sales Li%ht !&lb Di#ision operatin% inco'e Li%ht !&lb Di#ision total assets Li%ht !&lb Di#ision c&rrent liabilities orporate tar%et rate of ret&rn orporate wei%hte) a#era%e cost of capital orporate effecti#e ta7 rate D 61.001000 D 6.01000 D +10001000 D ..01000 1.M 11M +.M

Ahat is the Li%ht !&lb Di#ision8s capital t&rno#erC A) 10.0 !) -.0 ) (.. D) ... Answer: E7planation: ) apital t&rno#er Q SalesPTotal assets Q 61.001000P+10001000 Q (.. Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

.1 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1+9) The followin% )ata relates to Lo%an Electric an) its Li%ht !&lb Di#ision. Li%ht !&lb Di#ision sales Li%ht !&lb Di#ision operatin% inco'e Li%ht !&lb Di#ision total assets Li%ht !&lb Di#ision c&rrent liabilities orporate tar%et rate of ret&rn orporate wei%hte) a#era%e cost of capital orporate effecti#e ta7 rate D 61.001000 D 6.01000 D +10001000 D ..01000 1.M 11M +.M

Ahat is the Li%ht !&lb Di#ision8s "et&rn on 2n#est'ent >"O2)C A) (.M !) 10M ) (.0M D) 19.++M Answer: A E7planation: A) "et&rn on in#est'ent Q Operatin% inco'e PTotal assets Q 6.01000P+10001000 Q (. M Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

.( opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1+:) The followin% )ata relates to Lo%an Electric an) its Li%ht !&lb Di#ision. Li%ht !&lb Di#ision sales Li%ht !&lb Di#ision operatin% inco'e Li%ht !&lb Di#ision total assets Li%ht !&lb Di#ision c&rrent liabilities orporate tar%et rate of ret&rn orporate wei%hte) a#era%e cost of capital orporate effecti#e ta7 rate D 61.001000 D 6.01000 D +10001000 D ..01000 1.M 11M +.M

Ahat is the Li%ht !&lb Di#ision8s "esi)&al 2nco'e >"2)C A) D>+6.1000) !) D-(01000 ) D(191000 D) D+001000 Answer: D E7planation: D) "esi)&al inco'e Q Operatin% inco'e - >Tar%et rate of ret&rn R Total assets) Q 6.01000 - >1.M R +10001000) Q 6.01000 - -.01000 Q +001000 Diff: + LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

.+ opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1-0) The followin% )ata relates to 3a#en orporation an) its Iorthern Di#ision. Li%ht !&lb Di#ision sales Li%ht !&lb Di#ision operatin% inco'e Li%ht !&lb Di#ision total assets Li%ht !&lb Di#ision c&rrent liabilities orporate tar%et rate of ret&rn orporate wei%hte) a#era%e cost of capital D 91.001000 D :.01000 D -10001000 D 6.01000 1.M 10M

Ahat is the Iorthern Di#ision8s "esi)&al 2nco'e >"2)C A) D4001000 !) D:.01000 ) D-001000 D) D+.01000 Answer: D E7planation: D) "esi)&al inco'e Q Operatin% inco'e - >Tar%et rate of ret&rn R Total assets) Q :.01000 - >1.M R -10001000) Q :.01000 - 4001000 Q +.01000 Diff: + LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1-1) The /asta Di#ision of Ahole ,rain orporation ha) sales of D.1.001000 an) operatin% inco'e of D11+6.1000 last year. The total assets of the /asta Di#ision were D(16.010001 while c&rrent liabilities were D++01000. Ahole ,rain orporation8s tar%et rate of ret&rn is 1(M1 while its wei%hte) a#era%e cost of capital is 9M. The effecti#e ta7 rate for the co'pany is +0M. Ahat is the /asta Di#ision8s sales 'ar%inC A) (0.00M !) (..00M ) 4.00M D) .0.00M Answer: ! E7planation: !) Sales 'ar%in Q Operatin% inco'ePSales Q 11+6.1000P.1.001000 Q (.M Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

.opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1-() The /asta Di#ision of Ahole ,rain orporation ha) sales of D.1.001000 an) operatin% inco'e of D11+6.1000 last year. The total assets of the /asta Di#ision were D(16.010001 while c&rrent liabilities were D++01000. Ahole ,rain orporation8s tar%et rate of ret&rn is 1(M1 while its wei%hte) a#era%e cost of capital is 9M. The effecti#e ta7 rate for the co'pany is +0M. Ahat is the /asta Di#ision8s capital t&rno#erC A) -.0 !) ..0 ) 14.6 D) (.0 Answer: D E7planation: D) apital t&rno#er Q SalesPTotal assets Q .1.00.000P(16.01000 Q (.0 Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1-+) The /asta Di#ision of Ahole ,rain orporation ha) sales of D.1.001000 an) operatin% inco'e of D11+6.1000 last year. The total assets of the /asta Di#ision were D(16.010001 while c&rrent liabilities were D++01000. Ahole ,rain orporation8s tar%et rate of ret&rn is 1(M1 while its wei%hte) a#era%e cost of capital is 9M. The effecti#e ta7 rate for the co'pany is +0M. Ahat is the /asta Di#ision8s "et&rn on 2n#est'ent >"O2)C A) (..00M !) 4.00M ) .0.00M D) (00.00M Answer: E7planation: ) "et&rn on in#est'ent Q Operatin% inco'ePTotal assets Q 11+6.1000P(16.01000 Q .0M Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

.. opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1--) The /asta Di#ision of Ahole ,rain orporation ha) sales of D.1.001000 an) operatin% inco'e of D11+6.1000 last year. The total assets of the /asta Di#ision were D(16.010001 while c&rrent liabilities were D++01000. Ahole ,rain orporation8s tar%et rate of ret&rn is 1(M1 while its wei%hte) a#era%e cost of capital is 9M. The effecti#e ta7 rate for the co'pany is +0M. Ahat is the /asta Di#ision8s "esi)&al 2nco'e >"2)C A) D110-.1000 !) D6491:00 ) D111..1000 D) D++01000 Answer: A E7planation: A) "esi)&al inco'e Q Operatin% inco'e - >Tar%et rate of ret&rn R Total assets) Q 11+6.1000 - >1(M R (16.01000) Q 11+6.1000 - ++01000 Q 110-.1000 Diff: + LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1-.) The So&thern Di#ision of A'elia orporation ha) sales of D41.001000 an) operatin% inco'e of D11(001000 last year. The total assets of the So&thern Di#ision were D+100010001 while c&rrent liabilities were D-.01000. A'elia orporation8s tar%et rate of ret&rn is 10M1 while its wei%hte) a#era%e cost of capital is 4M. The effecti#e ta7 rate for the co'pany is +0M. Ahat is the So&thern Di#ision8s "et&rn on 2n#est'ent >"O2)C A) (..00M !) 4.00M ) -0.00M D) (00.00M Answer: E7planation: ) "et&rn on in#est'ent Q Operatin% inco'ePTotal assets Q 11(001000P+10001000 Q -0M Diff: + LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

.4 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1-4) Selecte) financial )ata for the /hotocopies Di#ision of Eli;abeth8s !&siness 5achines is as follows: Sales Operatin% inco'e Total assets &rrent liabilities "e<&ire) rate of ret&rn Aei%hte) a#era%e cost of capital D 419001000 D (10-01000 D (16(01000 D +.01000 1+M 9M

Ahat is the /hotocopier Di#ision8s sales 'ar%inC A) (.0.00M !) 6..00M ) ..1.M D) +0.00M Answer: D E7planation: D) Sales 'ar%in Q Operatin% inco'e P Sales Q (10-01000 P 419001000 Q +0M Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1-6) Selecte) financial )ata for the /hotocopies Di#ision of Eli;abeth8s !&siness 5achines is as follows: Sales Operatin% inco'e Total assets &rrent liabilities "e<&ire) rate of ret&rn Aei%hte) a#era%e cost of capital D 419001000 D (10-01000 D (16(01000 D +.01000 1+M 9M

Ahat is the /hotocopier Di#ision8s capital t&rno#erC A) +.+ !) (.. ) 1:.D) 1.+ Answer: ! E7planation: !) apital t&rno#er Q SalesPTotal assets Q 419001000P(16(01000 Q (.. Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1-9) Selecte) financial )ata for the /hotocopies Di#ision of Eli;abeth8s !&siness 5achines is as follows: Sales Operatin% inco'e Total assets &rrent liabilities "e<&ire) rate of ret&rn Aei%hte) a#era%e cost of capital D 419001000 D (10-01000 D (16(01000 D +.01000 1+M 9M

.6 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

Ahat is the /hotocopier Di#ision8s ret&rn on in#est'entC A) ..1.M !) +0.00M ) 6..00M D) (.0.00M Answer: E7planation: ) "et&rn on in#est'ent Q Operatin% inco'ePTotal assets Q (10-01000P(16(01000 Q 6.M Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1-:) Selecte) financial )ata for the /hotocopies Di#ision of Eli;abeth8s !&siness 5achines is as follows: Sales Operatin% inco'e Total assets &rrent liabilities "e<&ire) rate of ret&rn Aei%hte) a#era%e cost of capital D 419001000 D (10-01000 D (16(01000 D +.01000 1+M 9M

Ahat is the /hotocopier Di#ision8s resi)&al inco'eC A) D114941-00 !) D+.+1400 ) D111.41000 D) D114:01000 Answer: A E7planation: A) "esi)&al inco'e Q Operatin% inco'e - >tar%et rate of ret&rn R Total assets) Q (10-01000 - >1+M R (16(01000) Q (10-01000 - +.+1400 Q 114941-00 Diff: ( LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1.0) The En%ine Di#ision of The le#elan) A&to'oti#e orporation ha) sales of D61(001000 an) operatin% inco'e of D94-1000 last year. The total assets of the En%ine Di#ision were D+1(001000 while c&rrent liabilities were D9001000. The le#elan) A&to'oti#e orporation8s tar%et rate of ret&rn is 1+M while its wei%hte) a#era%e cost of capital is :M. The effecti#e ta7 rate for the co'pany is -.M. "e<&ire): a. alc&late the sales 'ar%in. b. alc&late the capital t&rno#er. c. alc&late the ret&rn on in#est'ent >"O2). ). alc&late the resi)&al inco'e. Answer: Part a" Operatin% inco'e D 94-1000 Di#i)e by Di#i)e by
.9 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

Sales Sales 'ar%in Part b" Sales Di#i)e by Total assets apital t&rno#er Part c" Operatin% inco'e Di#i)e by Total assets "et&rn on in#est'ent Part " Total assets Tar%et rate of ret&rn Tar%et ret&rn Operatin% inco'e Tar%et ret&rn "esi)&al inco'e

D 61(001000 1(.00M

D 61(001000 Di#i)e by D +1(001000 (.(.

D 94-1000 Di#i)e by D +1(001000 (6.00M

D +1(001000 1+M D -141000 D 94-1000 D >-141000) D --91000

Diff: + LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1.1) The Ta;; Di#ision of 3ei%hts "ecor)in% orporation ha) the followin% res&lts last year. Sales Operatin% inco'e Total assets &rrent liabilities D1010001000 D (1(001000 D-10001000 D (1.001000

5ana%e'ent8s tar%et rate of ret&rn is 1(M an) the wei%hte) a#era%e cost of capital is :M. 2ts effecti#e ta7 rate is -0M. "e<&ire): a. alc&late the ret&rn on in#est'ent >"O2). b. alc&late the resi)&al inco'e. Answer: Part a" Operatin% inco'e Di#i)e by Total assets "et&rn on in#est'ent Part b" Total assets

D (1(001000 Di#i)e by D-10001000 ...00M

D-10001000
.: opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

Tar%et rate of ret&rn Tar%et ret&rn Operatin% inco'e Tar%et ret&rn "esi)&al inco'e

1(M D -901000 D (1(001000 D >-901000) D 116(01000

Diff: + LO: 10-+ EO : E10-(+ AA S!: Analytical Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1.() A fle7ible b&)%et is a b&)%et prepare) for '&ltiple #ol&'e le#els. Answer: T"*E Diff: 1 LO: 10-EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets

40 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1.+) A fle7ible b&)%et is a b&)%et prepare) for a )ifferent le#el of #ol&'e than that which was ori%inally anticipate). Answer: T"*E Diff: 1 LO: 10-EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets 1.-) Another na'e for a static b&)%et is a fle7ible b&)%et. Answer: FALSE Diff: 1 LO: 10-EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets 1..) 2n a fle7ible b&)%et1 total fi7e) costs )o not chan%e as pro)&ction #ol&'e chan%es. Answer: T"*E Diff: 1 LO: 10-EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets 1.4) The fle7ible b&)%et total cost for'&la applies only to a specific rele#ant ran%e. Answer: T"*E Diff: 1 LO: 10-EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets 1.6) Fle7ible b&)%ets are b&)%ets that s&''ari;e cost an) re#en&e infor'ation for a sin%le #ol&'e le#el. Answer: FALSE Diff: 1 LO: 10-EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets

41 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1.9) !oth the static b&)%et an) the fle7ible b&)%et &se) for perfor'ance e#al&ation are )e#elope) before the perio) of act&al pro)&ction. Answer: FALSE Diff: 1 LO: 10-EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets 1.:) The )ifference between the act&al re#en&es an) e7penses an) the 'aster b&)%et is $nown as a A) capital b&)%et #ariance. !) fle7ible b&)%et #ariance. ) static b&)%et #ariance. D) 'aster b&)%et #ariance. Answer: D Diff: 1 LO: 10-EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets 140) The ???????? is best for 'ana%ers to &se in or)er to plan re#en&es an) e7penses at )ifferent sales #ol&'es. A) fle7ible b&)%et !) capital b&)%et ) static b&)%et D) 'aster b&)%et Answer: A Diff: 1 LO: 10-EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets 141) Aith re%ar) to a static b&)%et instea) of a fle7ible b&)%et1 which of the followin% is trueC A) A static b&)%et is a)@&ste) for chan%es in the le#el of sales acti#ity. !) A static b&)%et is a b&)%et that stays the sa'e fro' one perio) to the ne7t. ) A static b&)%et is prepare) for only one le#el of sales acti#ity. D) A static b&)%et is also $nown as a fi7e) b&)%et. Answer: Diff: 1 LO: 10-EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets

4( opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

14() The ???????? is a b&)%et base) on '&ltiple le#els of pro@ecte) sales or pro)&ction. A) stan)ar) b&)%et !) fle7ible b&)%et ) static b&)%et D) fi7e) b&)%et Answer: ! Diff: 1 LO: 10-EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets 14+) Aith re%ar) to fle7ible b&)%ets1 which of the followin% state'ents is trueC A) They are prepare) for one le#el of sales #ol&'e. !) 5ana%ers &se the' to help plan for &ncertainties. ) They are prepare) by the acco&ntin% )epart'ent on an ann&al basis. D) They are )esi%ne) to esti'ate re#en&es only. Answer: ! Diff: 1 LO: 10-EO : S10-1. AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets

4+ opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

14-) S&''er Ii%hts sells bottles of b&% spray for D4..0 each. Jariable costs are D+.00 per bottle1 while fi7e) costs are D--1000 per 'onth for #ol&'es &p to +01000 bottles of spray an) D.-1000 per 'onth for #ol&'es abo#e +01000 bottles of spray. The fle7ible b&)%et wo&l) reflect 'onthly operatin% inco'e for 1:1000 bottles of lotion an) (-1000 bottles of lotion of what )ollar a'o&ntsC A) D6:1.00 an) D-010001 respecti#ely !) D((1.00 an) D-010001 respecti#ely ) D1(+1.00 an) D1.410001 respecti#ely D) D1(1.00 an) D10(10001 respecti#ely Answer: ! E7planation: !) Fle7ible !&)%et Le#el 1 o&tp&t Le#el ( o&tp&t O&tp&t &nits 1:1000 (-1000 "e#en&e >U of &nits R sellin% price) Jariable osts >U of &nits R #ariable cost per &nit) Fi7e) e7penses Total e7penses Operatin% inco'e D1(+1.00 >1:1000 R 4..0) D.61000 >1:1000 R +.00) D--1000 D1011000 >.61000 V --1000) D((1.00 >1(+1.00 - 1011000) D1.41000 >(-1000 R 4..0) D6(1000 >(-1000 R +.00) D--1000 D1141000 >6(1000 V --1000) D-01000 >1.41000 - 1141000)

Diff: ( LO: 10-EO : E10-(4 AA S!: Analytical Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets

4opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

14.) A %raph of a fle7ible b&)%et for'&la reflects fi7e) costs of D-.1000 per 'onth an) total costs of D1001000 at a #ol&'e of .1000 &nits. Ass&'in% the rele#ant ran%e is 11000 to (01000 &nits1 the %raph wo&l) reflect total 'onthly costs at 1.1000 &nits of what )ollar a'o&ntC A) D(101000 !) D1001000 ) D+-.1000 D) D14.1000 Answer: A E7planation: A) Total costs D1001000 Fi7e) costs D>-.1000) Jariable costs D..1000 2nitial #ol&'e .1000 Jariable cost per &nit 11 Q ..1000 P .1000 Jariable cost per &nit 11 Tar%et &nits 1.1000 Jariable costs at tar%et #ol&'e 14.1000 Q 1.1000 R 11 Fi7e) costs V -.1000 Total costs at tar%et #ol&'e D(101000 Diff: ( LO: 10-EO : E10-(4 AA S!: Analytical Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets 144) /lat; o'pany 'a$es chairs. The b&)%ete) sellin% price is D-. per chair1 the #ariable rate is D1. per chair an) b&)%ete) fi7e) costs are D-01000 per 'onth. Ahat is the b&)%ete) operatin% inco'e for +1(00 chairs sol) in a 'onthC A) D991000 !) D:41000 ) D.41000 D) D1--1000 Answer: E7planation: ) "e#en&e >U of &nits R sellin% price per &nit) +1(00 R -. Q D1--1000 Jariable osts >U of &nits R #ariable cost per &nit) +1(00 R 1. Q D-91000 Fi7e) costs D-01000 Total e7penses -91000 V -01000 Q D991000 Operatin% inco'e 1--1000 - 991000 Q D.41000 Diff: ( LO: 10-EO : E10-(4 AA S!: Analytical Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets

4. opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

146) /e))lin8 /ete8s ycles sells its entry-le#el bicycles for D-00 each. 2ts #ariable cost is D(.0 per bicycle. Fi7e) costs are D+.1000 per 'onth for #ol&'es &p to 11(00 bicycles. Abo#e 11(00 bicycles1 'onthly fi7e) costs are D..1000. Ahat is the b&)%ete) operatin% inco'e at a le#el of :00 bicycles per 'onthC A) D1001000 !) D1+.1000 ) D+(.1000 D) D 901000 Answer: A E7planation: A) "e#en&e >U of &nits R sellin% price per &nit) :00 R -00 Q D+401000 Jariable osts >U of &nits R #ariable cost per &nit) :00 R (.0 Q D((.1000 Fi7e) e7penses D+.1000 Total e7penses D(401000 Q ((.1000 V +.1000 Operatin% inco'e +401000 - (401000 Q D1001000 Diff: ( LO: 10-EO : E10-(4 AA S!: Analytical Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets 149) /e))lin8 /ete8s ycles sells its entry-le#el bicycles for D-00 each. 2ts #ariable cost is D(.0 per bicycle. Fi7e) costs are D+.1000 per 'onth for #ol&'es &p to 11(00 bicycles. Abo#e 11(00 bicycles1 'onthly fi7e) costs are D..1000. Ahat is the b&)%ete) operatin% inco'e at a le#el of 11+00 bicycles per 'onthC A) D1:.1000 !) D-4.1000 ) D1-01000 D) D1401000 Answer: E7planation: ) "e#en&e >U of &nits R sellin% price per &nit) 11+00 R -00 Q D.(01000 Jariable osts >U of &nits R #ariable cost per &nit) 11+00 R (.0 Q D+(.1000 Fi7e) e7penses D..1000 Total e7penses +(.1000 V ..1000 Q +901000 Operatin% inco'e .(01000 - +901000 Q 1-01000 Diff: ( LO: 10-EO : E10-(4 AA S!: Analytical Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets

44 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

14:) So&thern 2nstr&'ents 'a$es calc&lators for b&siness applications. The b&)%ete) sellin% price is D1(0 per calc&lator1 the #ariable rate is D:9 per calc&lator an) b&)%ete) fi7e) costs are D1.01000 per 'onth. Ahat is the b&)%ete) operatin% inco'e for 1.1000 calc&lators sol) in a 'onthC A) D++01000 !) D114(01000 ) D119001000 D) D1901000 Answer: D E7planation: D) "e#en&e >U of &nits R sellin% price per &nit) 1.1000 R 1(0 Q D119001000 Jariable osts >U of &nits R #ariable cost per &nit) 1.1000 R :9 Q D11-601000 Fi7e) costs D1.01000 Total e7penses 11-601000 V 1.01000 Q D114(01000 Operatin% inco'e 119001000 - 114(01000 Q D1901000 Diff: ( LO: 10-EO : E10-(4 AA S!: Analytical Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets 160) Da#is orporation 'an&fact&res an) sells portable ra)ios. The ra)io sells for D+. per &nit an) its #ariable costs per &nit are D+0. Fi7e) costs are D4-1000 per 'onth for sales #ol&'es &p to +(1000 ra)ios. 2f 'ore than +(1000 ra)ios are sol)1 the fi7e) costs will be D9+1000. The fle7ible b&)%et wo&l) reflect what 'onthly operatin% inco'e for a sales #ol&'e of -11000 ra)iosC A) D1-11000 !) D1((1000 ) D11-+.1000 D) D(0.1000 Answer: ! E7planation: !) O&tp&t &nits -11000 "e#en&e >U of &nits R sellin% price) -11000 R +. QD11-+.1000 Jariable osts >U of &nits R #ariable cost per &nit) -11000 R +0 Q D11(+01000 Fi7e) e7penses D9+1000 Total e7penses 11(+01000 V 9+1000 Q D11+1+1000 Operatin% inco'e 11-+.1000 - 11+1+1000 Q D1((1000 Diff: ( LO: 10-EO : E10-(4 AA S!: Analytical Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets

46 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

161) So&n) Desi%n sells its co'p&ter spea$ers for D11. per set. 2ts #ariable cost is D6. per set of spea$ers. Fi7e) costs are D901000 per 'onth for #ol&'es &p to (1-00 sets of spea$ers. Abo#e (1-00 sets1 'onthly fi7e) costs are D11.1000. Ahat is the b&)%ete) operatin% inco'e >loss) at a sales le#el of (1+00 sets of spea$ers per 'onthC A) Operatin% loss of D(+1000 !) Operatin% inco'e of D:(1000 ) Operatin% inco'e of D1(1000 D) Operatin% inco'e of D19-1.00 Answer: E7planation: ) "e#en&e >U of &nits R sellin% price per &nit) (1+00 R 11. QD(4-1.00 Jariable osts >U of &nits R #ariable cost per &nit) (1+00 R 6. Q D16(1.00 Fi7e) e7penses D901000 Total e7penses 16(1.00 V 901000 Q D(.(1.00 Operatin% inco'e (4-1.00 - (.(1.00 Q D1(1000 Diff: ( LO: 10-EO : E10-(4 AA S!: Analytical Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets 16() So&n) Desi%n sells its co'p&ter spea$ers for D11. per set. 2ts #ariable cost is D6. per set of spea$ers. Fi7e) costs are D901000 per 'onth for #ol&'es &p to (1-00 sets of spea$ers. Abo#e (1-00 sets1 'onthly fi7e) costs are D11.1000. Ahat is the b&)%ete) operatin% inco'e >loss) at a sales le#el of (1400 sets of spea$ers per 'onthC A) Operatin% loss of D111000 !) Operatin% inco'e of D10-1000 ) Operatin% inco'e of D(-1000 D) Operatin% inco'e of D19-1000 Answer: A E7planation: A) "e#en&e >U of &nits R sellin% price per &nit) (1400 R 11. QD(::1000 Jariable osts >U of &nits R #ariable cost per &nit) (1400 R 6. Q D1:.1000 Fi7e) e7penses D11.1000 Total e7penses 1:.1000 V 11.1000 Q +101000 Operatin% inco'e (::1000 - +101000 Q >111000) Diff: ( LO: 10-EO : E10-(4 AA S!: Analytical Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets

49 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

16+) i#ic orporation pro#i)e) the followin% partially co'plete) 'onthly fle7ible b&)%et. o'plete the fle7ible b&)%et.

Answer:

Diff: ( LO: 10-EO : E10-(4 AA S!: Analytical Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets

4: opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

16-) Tho'as orporation sells a &nit of its pro)&ct for D1(.001 res&ltin% in a contrib&tion 'ar%in of D6.00 per &nit. Fi7e) costs are b&)%ete) at D.01000 per <&arter for #ol&'es &p to 1(1000 &nits an) D901000 for #ol&'es e7cee)in% 1(1000 &nits. /repare the fle7ible b&)%et for the ne7t <&arter for #ol&'e le#els of 1110001 1+10001 an) 141000 &nits. Answer: Sales re#en&e per &nit D1(.00 ontrib&tion 'ar%in per &nit D6.00 Jariable e7penses per &nit D..00 Le#el 1 Jol&'e Le#el ( Jol&'e Le#el + Jol&'e 111000 1+1000 141000 D1+(1000 D1.41000 D1:(1000 D..1000 D.01000 D10.100 D(61000 D4.1000 D901000 D1-.1000 D111000 D901000 D901000 D1401000 D+(1000

*nits Sales re#en&e >&nits R re#en&e per &nit) Jariable e7penses >&nits R #ariable e7penses per &nit) Fi7e) e7penses >if #ol&'e li'it is e7cee)e) then hi%her fi7e) e7penses1 if not e7cee)e) then lower le#el of fi7e) e7penses) Total e7penses >#ariable e7penses V fi7e) e7penses) Operatin% inco'e >Sales re#en&e - total e7penses)

Diff: ( LO: 10-EO : E10-(4 AA S!: Analytical Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets

60 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

16.) A co'pany8s fle7ible b&)%et for :+1000 &nits of pro)&ction showe) sales of D+001000L #ariable costs of D1.01000L an) fi7e) costs of D:01000. Ahat net operatin% inco'e wo&l) yo& e7pect the co'pany to earn if it pro)&ces an) sells :91000 &nitsC >Ass&'e :91000 &nits is in the rele#ant ran%e.) Answer: D49104. Sales at fle7ible b&)%et pro)&ction le#el Fle7ible b&)%et pro)&ction le#el Sales price per &nit Iew le#el of sales Total sales at new le#el of sales Jariable costs Fle7ible b&)%et pro)&ction le#el Jariable cost per &nit Iew le#el of sales Total #ariable costs at new le#el of sales Total sales at new le#el of sales Total #ariable costs at new le#el of sales Fi7e) costs Iet inco'e at new le#el of sales D+001000 :+1000 D+.((.9 :91000 D+1411(: D1.01000 :+1000 D1.41( :91000 D1.9104-( D+1411(: D1.9104. D:01000 D49104-

Diff: ( LO: 10-EO : E10-(4 AA S!: Analytical Thin$in% Learnin% O&tco'e: /repare a fle7ible b&)%et an) )isc&ss the interpretation an) &se of fle7ible b&)%ets 164) The balance) scorecar) consi)ers only financial perfor'ance 'eas&res. Answer: FALSE Diff: 1 LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 166) Financial perfor'ance 'eas&res are $nown as la% in)icators. A la% in)icator is a perfor'ance 'eas&re that pre)icts future perfor'ance. Answer: FALSE Diff: 1 LO: 10-. EO : E10-(: AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 169) &sto'er satisfaction1 operational efficiency1 an) e'ployee e7cellence are often 'eas&re) as part of the balance) scorecar) approach. Answer: T"*E Diff: 1 LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s
61 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

16:) The &lti'ate p&rpose of the balance) scorecar) is to %i#e 'ana%e'ent a balance) #iew of the co'pany8s perfor'ance. Answer: T"*E Diff: 1 LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 190) =/2 in the !alance) Scorecar) stan)s for =nowle)%e /rofitability 2n)e7. Answer: FALSE Diff: 1 LO: 10-. EO : S10-1+ AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 191) Operations is one factor of the financial perspecti#e of the !alance) Scorecar). Answer: FALSE Diff: 1 LO: 10-. EO : S10-1+ AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 19() All fo&r perspecti#es '&st always be incl&)e) on each in)i#i)&al co'pany8s balance) scorecar). Answer: FALSE Diff: 1 LO: 10-. EO : S10-1+ AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

6( opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

19+) The fo&r perspecti#es of the balance) scorecar) incl&)e all of the followin% except A) financial. !) c&sto'er. ) cost. D) learnin% an) %rowth. Answer: Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 19-) The n&'ber of on-ti'e )eli#eries wo&l) be an e7a'ple of 'eas&rin% which perspecti#eC A) &sto'er !) Financial ) 2nternal b&siness D) Learnin% an) %rowth Answer: A Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 19.) E'ployee satisfaction wo&l) be an e7a'ple of 'eas&rin% which perspecti#eC A) Financial !) &sto'er ) Learnin% an) %rowth D) 2nternal b&siness Answer: Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

6+ opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

194) The n&'ber of repeat c&sto'ers wo&l) be an e7a'ple of 'eas&rin% which perspecti#eC A) &sto'er !) Financial ) 2nternal b&siness D) Learnin% an) %rowth Answer: A Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 196) The n&'ber of new ser#ices offere) )&rin% the perio) wo&l) be an e7a'ple of 'eas&rin% which perspecti#eC A) Financial !) &sto'er ) 2nternal b&siness D) Learnin% an) %rowth Answer: D Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 199) o'pany %rowth rates >co'pare) to in)&stry %rowth rates) wo&l) be an e7a'ple of 'eas&rin% which perspecti#eC A) Financial !) &sto'er ) 2nternal b&siness D) Learnin% an) %rowth Answer: D Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

6opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

19:) The n&'ber of rewor$ &nits wo&l) be an e7a'ple of 'eas&rin% which perspecti#eC A) Financial !) &sto'er ) 2nternal b&siness D) Learnin% an) %rowth Answer: Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1:0) The res&lts of a c&sto'er s&r#ey abo&t c&sto'er e7periences with the co'pany8s ser#ices wo&l) be an e7a'ple of 'eas&rin% which perspecti#eC A) Financial !) &sto'er ) 2nternal b&siness D) Learnin% an) %rowth Answer: ! Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1:1) Total ho&rs of contin&in% professional e)&cation ta$en by e'ployees wo&l) be an e7a'ple of 'eas&rin% which perspecti#eC A) Financial !) &sto'er ) 2nternal b&siness D) Learnin% an) %rowth Answer: D Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

6. opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1:() The n&'ber of new pro)&cts )e#elope) wo&l) be an e7a'ple of 'eas&rin% which perspecti#eC A) Financial !) &sto'er ) Learnin% an) %rowth D) 2nternal b&siness Answer: D Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1:+) The percenta%e of 'ar$et share wo&l) be an e7a'ple of 'eas&rin% which perspecti#eC A) Financial !) 2nternal b&siness ) &sto'er D) Learnin% an) %rowth Answer: Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1:-) The percenta%e of pro)&cts with sche'atics an) )etaile) operatin% instr&ctions a#ailable within the co'pany8s infor'ation syste' for &se by c&sto'er ser#ice representati#es wo&l) be an e7a'ple of 'eas&rin% which perspecti#eC A) Financial !) &sto'er ) Learnin% an) %rowth D) 2nternal b&siness Answer: D Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

64 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1:.) The n&'ber of )efects fo&n) )&rin% the 'an&fact&rin% process wo&l) be an e7a'ple of 'eas&rin% which perspecti#eC A) 2nternal b&siness !) &sto'er ) Financial D) Learnin% an) %rowth Answer: A Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1:4) The ???????? approach reco%ni;es that both financial an) operational perfor'ance 'eas&res sho&l) be consi)ere) when e#al&atin% co'pany perfor'ance. A) financial an) operational !) total ) co'plete D) balance) scorecar) Answer: D Diff: 1 LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1:6) The ???????? perspecti#e fro' the balance) scorecar) helps 'ana%ers answer the <&estion1 B3ow )o we loo$ to sharehol)ersCB A) financial !) internal b&siness ) c&sto'er D) learnin% an) %rowth Answer: A Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

66 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

1:9) The ???????? fro' the balance) scorecar) foc&ses on contin&in% to i'pro#e an) create #al&e. A) internal b&siness perspecti#e !) learnin% an) %rowth perspecti#e ) c&sto'er perspecti#e D) financial perspecti#e Answer: ! Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s 1::) The ???????? fro' the balance) scorecar) foc&ses on )eter'inin% if c&sto'ers are satisfie). A) internal b&siness perspecti#e !) learnin% an) %rowth perspecti#e ) c&sto'er perspecti#e D) financial perspecti#e Answer: Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s (00) The ???????? fro' the balance) scorecar) foc&ses on )eter'inin% the co'pany8s Bcli'ate for action.B A) internal b&siness perspecti#e !) learnin% an) %rowth perspecti#e ) c&sto'er perspecti#e D) financial perspecti#e Answer: ! Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

69 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

(01) "et&rn on in#est'ent an) re#en&e %rowth wo&l) be e7a'ples of A) internal b&siness perspecti#e. !) c&sto'er perspecti#e. ) financial perspecti#e. D) learnin% an) %rowth perspecti#e. Answer: Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s (0() The n&'ber of e'ployee s&%%estions i'ple'ente) an) percenta%e of the sales force with access to real-ti'e in#entory le#els wo&l) be e7a'ples of the A) financial perspecti#e. !) learnin% an) %rowth perspecti#e. ) internal b&siness perspecti#e. D) c&sto'er perspecti#e. Answer: ! Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s (0+) The n&'ber of warranty clai's wo&l) be an e7a'ple of the A) financial perspecti#e. !) c&sto'er perspecti#e. ) learnin% an) %rowth perspecti#e. D) internal b&siness perspecti#e. Answer: D Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

6: opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

(0-) &sto'er satisfaction ratin%s wo&l) be an e7a'ple of the A) c&sto'er perspecti#e. !) financial perspecti#e. ) internal b&siness perspecti#e. D) learnin% an) %rowth perspecti#e. Answer: A Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s (0.) ash flows fro' operations an) %ross 'ar%in %rowth wo&l) be e7a'ples of the A) c&sto'er perspecti#e. !) financial perspecti#e. ) internal b&siness perspecti#e. D) learnin% an) %rowth perspecti#e. Answer: ! Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s (04) Iew pro)&ct )e#elop'ent ti'e wo&l) be an e7a'ple of the A) financial perspecti#e. !) c&sto'er perspecti#e. ) learnin% an) %rowth perspecti#e. D) internal b&siness perspecti#e. Answer: D Diff: ( LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

90 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all

(06) List the fo&r areas of a balance) scorecar). Describe each area. Define B$ey perfor'ance in)icatorB >=/2). ,i#e an e7a'ple of a =/2 for each balance) scorecar) area Answer: 1. Financial /erspecti#eKThe financial perspecti#e helps 'ana%ers answer the <&estion1 how )o we loo$ to sharehol)ersC The &lti'ate %oal of a co'pany is to %enerate inco'e for its owners. The financial perspecti#e foc&ses 'ana%e'ent8s attention on =/2s that assess financial ob@ecti#es s&ch as re#en&e %rowth an) cost c&ttin%. So'e co''only &se) =/2s incl&)e sales revenue growth1 gross margin growth1 an) return on investment. (. &sto'er /erspecti#eKThe c&sto'er perspecti#e helps 'ana%ers e#al&ate the <&estion1 how )o c&sto'ers see &sC &sto'ers are typically concerne) with fo&r specific pro)&ct or ser#ice attrib&tes: >1) the pro)&ct8s price1 >() the pro)&ct8s <&ality1 >+) the sales ser#ice <&ality1 an) >-) the pro)&ct8s )eli#ery ti'e >the shorter the better). So'e co''only &se) =/2s incl&)e average customer satisfaction rating, percentage market share, increase in number of customers, number of repeat customers, and rate of on-time deliveries. +. 2nternal !&siness /erspecti#eKThe internal b&siness perspecti#e helps 'ana%ers a))ress the <&estion1 at what b&siness processes '&st we e7cel to satisfy c&sto'er an) financial ob@ecti#esC The answer to that <&estion incorporates three factors: >1) inno#ation1 >() operations1 an) >+) post-sales ser#ice. 2n a))ition to c&sto'er satisfaction ratin%s1 the c&sto'er perspecti#e is often 'eas&re) &sin% =/2s s&ch as number of new products developed, new product development time defect rate, manufacturing lead time, yield rate, number of warranty claims received, and average repair time. -. Learnin% an) ,rowth /erspecti#eKThe learnin% an) %rowth perspecti#e helps 'ana%ers assess the <&estion1 can we contin&e to i'pro#e an) create #al&eC The learnin% an) %rowth perspecti#e foc&ses on three factors: >1) e'ployee capabilities1 >() infor'ation syste' capabilities1 an) >+) the co'pany8s Bcli'ate for action.B The learnin% an) %rowth perspecti#e 'eas&res e'ployees8 s$ills1 $nowle)%e1 'oti#ation1 an) e'power'ent. =/2s typically incl&)e hours of employee training1 employee satisfaction1 employee turnover1 an) number of employee suggestions implemented. Iote: St&)ent e7a'ples 'ay #ary. Diff: + LO: 10-. EO : E10-+0 AA S!: "eflecti#e Thin$in% Learnin% O&tco'e: Disc&ss an) calc&late #ario&s perfor'ance 'eas&res &se) by 'ana%e'ent s&ch as "O21 resi)&al inco'e1 an) balance) scorecar)s

91 opyri%ht 0 (01+ /earson E)&cation1 2nc. p&blishin% as /rentice 3all