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84) Chaucer Ltd. has current assets of $450,000 and capital assets of $630,000. Its budgeted production volume for the next fiscal year is 200,000 units. Fixed costs are projected at $400,000 and variable unit costs for the one product produced total $5/unit. The company defines ROI as Operating Income/Total Assets.
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22.2   Evaluate current-cost and historical-cost asset measurement methods. 1) Current cost is the cost of purchasing an asset today identical to the one currently held. 2) The timing of feedback depends on the level of management that receives the information and on the complexity of the organization's information technology. 3) Current cost return.
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Use the information below to answer the following question(s). Thacker Company has two regional offices. The information for each is as follows: Edmonton Sarnia Revenues $290,000 $298,000 Total assets $2,900,000 $4,500,000 Net operating income $600,000 $1,200,000 30) What is the Edmonton Division's return on investment? A) 0.21 B) 0.27 C) 0.48 D) 2.06 E) 0.25 31) What is the return on investment for the Sarnia division? A) 0.21 B) 0.27 C) 0.48 D).
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22.3   Analyze the technical difficulties that arise when comparing the performance of divisions operating in different countries. 1) Comparing the performance of divisions of a multinational company operating in different countries is difficult because of the differences in economic, legal, political, social and cultural environments. 2) Benchmarks represent 'best practices', and can.
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40) River Road Paint Company has two divisions. The Production Division produces base colours used by the Mixing Division. In 2015 the Production Division had external sales of 200,000 units at $8.00 per unit; and, transferred 60,000 units to the Mixing Division. The variable costs in the Production Division were.
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34) Provide a complete definition of a management control system. For each of the following activities, characteristics, and applications, tell whether they are primarily labelled as being found in a centralized organization, a decentralized organization, or both types of organizations. A) both B) decentralization C) centralization 35) Freedom for managers at lower organizational levels to.
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82) Coptermagic Company supplies helicopters to corporate clients. Coptermagic has two sources of funds: long term debt with a market and book value of $32 million issued at an interest rate of 10%, and equity capital that has a market value of $18 million and book value of $8 million..
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60) A company's weighted-average cost of capital [WACC] was 9.6% last year. The company has $6,000,000 of bonds payable (its only debt) with a 9.25% coupon, and has $9,000,000 in equity capital. The tax rate is 35%. What is the company's cost of debt funding? A) 6.01% B) 6.25% C) 6.50% D) 9.25% E) 12.00% 61).
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88) Consolidated Gas Supply Corporation uses the investment center concept for the gasoline stations that it manages in the city. Consolidated has a 15% required rate of return on investment in order for a branch station to be viable. Select operating data for three of its stations for the current.
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86) The following table presents information related to three divisions of Bacchus Ltd.: Alpha Division Beta Division Delta Division Sales $12,000,000 E I Operating Income $2,640,000 F $450,000 Profit Margin A 24% 25% Asset Turnover B G 1.2 times ROI C 19.2% J Investment $6,600,000 H K Residual Income D $138,000 L The company's required rate of return is 10%. Required: Solve for the unknowns. 87) Stratton Industries has two divisions. These divisions reported the following results for the year just ended: Division 1 Division 2 Operating Income $840,000 $180,000 Assets $4,200,000 $750,000 Required: a.Calculate.
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21.3   Assess the market-based transfer price method. 1) When the intermediate market is perfectly competitive, interdependencies of subunits are minimal, and there are additional costs to the corporation as a whole then using the market price as the transfer price results in optimal decision making. 2) When demand outstrips supply, market prices.
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44) Vancouver Valley Ltd. has two divisions, Computer Services and Management Advisory Services. In addition to its external customers, each division performs work for the other division. The external fees earned by each division in the past year were $200,000 for Computer Services and $350,000 for Management Advisory Services. Computer.
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9) The Shamrock Corporation manufactures flower pots in Canada and Ireland. The operations are organized as decentralized divisions. The following information is available for the year just ended: Canada DivisionIrish Division Operating income $900,0001,250,000 € Total assets $3,500,000  2,100,000 € The exchange rate at the time of Shamrock's investment (the end of the previous.
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14) Alpine Ltd. has two divisions. Division A manufactures components that can be sold in the external market place or transferred to Division B for further processing. The following data relate to Division A's component product. Variable manufacturing costs/unit   $925 Fixed costs/unit at capacity   $275 Selling price/unit$1,800 The capacity of the plant is 2,500.
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  22.1   Analyze and evaluate alternative measures of financial performance. 1) Many common performance measures rely on internal financial and accounting information. 2) Some companies present financial and non-financial performance measures for various organization units in a single report called the financial performance scorecard. 3) In establishing performance measures and compensation policy, the issues.
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22.4   Evaluate the behavioural effects of salaries and incentives in compensation arrangements. 1) An important consideration in designing compensation arrangements is the tradeoff between creating incentives, and reducing risk. 2) Moral hazard describes contexts in which, once risk is shared, the individual fails to make as much effort to avoid harm as.
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21) Deciding if all subunits should have the same required rate of return is an example of A) deciding on the level of relevance and urgency of feedback. B) deciding on measurement alternatives for each performance measure. C) deciding on components n each performance measure. D) deciding on criteria targets against which to measure.
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21.4   Apply relevant costs and tax considerations to evaluate the selection of cost-based and negotiated transfer prices. 1) Outlay costs are defined as the maximum contribution foregone by the supply division if the products or services are transferred internally. 2) Full-cost transfer prices are adequate and lead to goal congruence for decisions.
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72) Batman Abstract Company has three divisions that operate autonomously. Their results for the current year were as follows: Riddler Joker Penguin Sales $5,000,000 $7,000,000 $10,000,000 Contribution margin 1,440,000 1,700,000 3,500,000 Operating income 1,000,000 1,750,000 2,520,000 Investment base 9,000,000 10,000,000 14,000,000 The company's desired rate of return is 20%. Required: a.Compute each division's ROI. b.Compute each division's residual income. c.Rank each division by both ROI and residual income. 73) Hargrave Products has three divisions which.
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21.5   Analyze income tax considerations in multinational transfer pricing. 1) Additional factors that arise in multinational transfer pricing include tariffs and customs duties levied on imports of products into a country. 2) It is possible to increase the overall after-tax profit of a multinational corporation by adjusting transfer prices. 3) Sales between.
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80) Capital Investments has three divisions. Each division's required rate of return is 15 percent. Planned operating results for next year are: DivisionOperating incomeInvestment A$15,000,000 $100,000,000 B25,000,000125,000,000 C11,000,00050,000,000 The company is planning an expansion requiring each division to increase its investments by $25,000,000 and its income by $4,500,000. Required: a.Compute the current ROI for each division. b.Compute the.
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22.5   Apply strategic concepts to analyze the four levers of control and evaluate their usefulness. 1) Ethical behaviour on the part of managers, while important for its own sake, is not paramount in importance. 2) An interactive control system is a formal information system that managers use to focus organization attention and.
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11) A product is know as ________ when it is transferred from one subunit to another subunit in the same organization. A) an interdepartmental product. B) an intermediate product. C) a subunit product. D) a transfer product. E) a secondary product. 12) The price one subunit of an organization charges for a product or service supplied.
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15) What are some of the factors, other than income taxation, that companies should consider when setting international transfer prices? 16) A company has a plant in a high tax jurisdiction that produces products for a facility in a low tax jurisdiction. Suggest a strategy, including transfer prices, which will result.
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18) National Can Company has three divisions, Eastern, Midwestern, and Western. Because of very different accounting methods and inflation rates in different countries it is considering multiple evaluation measures. Information gathered about the divisions for the year just ended follows: Assets Income Book valueCurrent value Book valueCurrent value Eastern$600,000$900,000 $120,000$110,000 Midwestern700,000 700,000120,000 120,000 Western 1,000,000.
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11) The first step in designing accounting based performance measures is to choose performance measures that align with top management's financial goals. 12) Return on investment is also called the accrual accounting rate of return. 13) Investment turnover is calculated by dividing investment by revenues. 14) Return on sales is calculated.
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11) What are Bleach's and Bleach-2's return on investment based on current values? A) 0.22; 0.67 B) 0.42; 0.52 C) 0.52; 0.42 D) 0.67; 0.22 E) 0.50; 0.45 12) What are Bleach's and Bleach-2's residual incomes, based on current values, respectively? A) $116,250; $37,500 B) $110,000; $67,500 C) $67,500; $110,000 D) $37,500; $116,250 E) $115,340; $80,000 Answer the following question(s) using the.
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40) What is the Alpha Division's investment turnover? A) .50 B) 1.0 C) 2.4 D) 3.5 E) 0.42 41) What is the Beta Division's investment turnover? A) .50 B) 0.75 C) 0.67 D) 2.5 E) 1.5 Use the information below to answer the following question(s). The top management at Groundsource Company, a manufacturer of lawn and garden equipment, is attempting to.
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21) What is the Refining Division's operating income if 150 litres of oil are sold at $110 /litre and 200 litres are transferred in? Assume the transfer price is based on 175% of variable costs. A) $16,500 B) $15,600 C) $525 D) $6,825 E) $8,500 Use the information below to answer the following question(s). Bon Accord uses.
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36) Walton Industries has two divisions: Machining and Assembly. The Assembly Division is looking to source 20,000 units annually of specialized component product from Machining Division. The special components have variable costs of $260 per unit in variable production costs. The Machine Products Division has a bid from an outside.
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11) What is the monthly operating advantage (disadvantage) of purchasing the goods internally assuming the Production Division is able to utilize the facilities for other operations resulting in monthly cash-operating savings of $40,000? A) $440,000 B) $40,000 C) $280,000 D) $(280,000) E) $(360,000) 12) What would be the monthly operating advantage (disadvantage) of purchasing the goods.
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Use the information below to answer the following question(s). Crush Company makes internal transfers at 180% of full cost. The Soda Refining division purchases 30,000 containers of carbonated water per day, on average, from a local supplier, who delivers the water for $30 per container via an external shipper. In order.
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75) Jim's Quality Pre-owned Auto Sales Ltd. allows its divisions to operate as autonomous units. Their results for the current year were as follows: SUVs Trucks Cars Revenues $1,650,000 $900,000 $5,800,000 Current assets 210,000 152,500 419,000 Capital assets 870,000 630,000 1,590,000 Current liabilities 275,000 127,000 399,000 Net operating income 235,000 70,000 560,000 After-tax income 186,000 55,404 443,234 Weighted average cost of capital 9.5% 9.5% 9.5% Required: For each division compute the a.return on sales b.return on investment based on total assets employed c.economic value added d.residual.
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38) The Micro Division of Silicon Computers produces computer chips that are sold to the Personal Computer Division and to outsiders. Operating data for the Micro Division are as follows: Internal SalesExternal Sales Sales: 300,000 chips at $10$3,000,000 200,000 chips at $12 $2,400,000 Variable expenses at $41,200,000800,000 Contribution margin$1,800,000$1,600,000 Fixed cost (allocated on units)1,500,000 1,000,000 Operating income$300,000$600,000 The.
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21.2   Apply transfer-pricing processes. 1) Products transferred between subunits within an organization are considered intermediate products. 2) Department A charges Department B $1,350 for copying services provided. The $1,350 is considered a transfer price. 3) Examples of market-based transfer prices include variable manufacturing costs, full manufacturing costs, and full product costs. 4) Negotiated transfer.
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13) Hendricks Ltd. of Calgary manufactures and sells computers. The Manufacturing Division is located in China and transfers 75% of its output to the Assembly Division in the Philippines. The balance of the product is sold in the local market at 2,100 yuan/unit. The Philippines division sells 20% of its.
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49) The Brownshoe Company has three specialized divisions. The Casual Shoe Division has asked the Sole Division to supply it with a large quantity of soles. The Sole Division is currently at capacity. The Sole Division sells soles outside for $5.00 each. The Casual Shoe Division, which is operating at.
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46) Sportswear Ltd. manufactures socks. The Athletic Division sells its socks for $6 a pair to outsiders. Socks have manufacturing variable and fixed costs of $2.50 and $1.50, respectively. The division's total fixed manufacturing costs are $105,000 at the normal volume of 70,000 units. The European Division has offered to buy 15,000.
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20) The following data are available for a manufacturing business started as a new company five years ago when the construction cost index was 115: Current liabilities $190,000 Operating income $329,000 NBV long-term assets (end year 4) $1,200,000 Current assets $600,000 Gross book value * $2,000,000 Estimated total useful life * 10 years Age of assets * 5 years Construction cost index end of year.
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For each of the following transfer price descriptions or operating situations, tell which of the general methods of transfer pricing it is most appropriate. A) cost-based B) market-based C) negotiated D) any method 56) Bargaining between selling and buying units 57) Budgeted costs 58) 145% of full costs 59) Internal product transfers are required if goods are available.
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14) Bob Cellular Phone uses ROI to measure divisional performance. Annual ROI calculations for each division have traditionally employed the ending amount of invested capital along with annual operating income and net revenue. The DuPont method is generally used. The company's Phone Accessories Division had the following results: Previous Year ROI.
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