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24.5-1ROI (return on investment) focuses on the ratio of operating income to average assets. 24.5-2ROI is calculated using income before taxes, interest expense, and other non-operating income. 24.5-3The formula for ROI takes the total company net income and divides by assets. 24.5-4Recreation Equipment Company has several divisions that are investment centers.  Data for.
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24.5-51Marcia Consumer Products has several divisions, including the Education Division and the Recreation                                           Division.  Data on the two divisions are shown here: Education Division Recreation Division Current ROI 9.2% 10.0% Current WACC 8.0% 8.0% Operating income $110,000 $200,000 Effective tax rate 20.0% 20.0% Average total assets $1,200,000 $2,000,000 Current liabilities $30,000 $30,000 How much is the EVA for the Education Division? A)  $12,890 B) .
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24.1-1When a small company grows to a large size, it may decide to decentralize because it is difficult                                           for one owner (or manager) to manage an entire, large business. 24.1-2Small companies tend to use centralized decision-making because of the smaller scope of their                                           operations. 24.1-3Companies.
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24.2-12The performance measurement system should compare the company’s performance against the best                                           practices in the industry.  This statement reflects which of the following performance measurement goals? A)    Motivating unit managers B)     Promoting goal congruence C)     Providing feedback D)    Benchmarking 24.2-13The performance measurement system must ensure that managers know the specific goals and.
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23.3-11Manufacturing companies that use standard costs do NOT need to compute inventory cost based on LIFO,                             FIFO, or weighted average 23.3-12Price Variance = (Actual Price x Actual Quantity) – (Standard Price x Standard Quantity). 23.3-13Efficiency Variance = (Standard Price x Actual Quantity) – (Standard Price x Standard Quantity). 23.3-14The static budget.
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23.3-31Which of the following statements is TRUE about price variances and quantity (or efficiency) variances? A)    They pertain to the difference between the static budget and actual results. B)     They pertain to the difference between the flexible budget and actual results. C)     They pertain to the difference between the flexible budget and the.
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23.4-41Faas Marine Stores Company manufactures decorative fittings for luxury yachts which require highly                                           skilled labor, and special metallic materials.  Faas uses standard costs to prepare its flexible budget.  For                                           the first quarter of 2011, direct material and direct labor standards for one of their.
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23.2-9Onyx Company prepared a static budget at the beginning of the month.  At the end of the month, the                                           company is analyzing actual results versus budget using flexible budget methodology.  Data are as                                           follows: Static budget:  Sales volume: 1,000 unitsPrice: $70 per unit Variable expense:  $32.
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24.5-11If upper management is NOT satisfied with a division’s asset turnover ratio, they should attempt to decrease operating expenses in order to raise the turnover. 24.5-12If a company division has a negative RI (residual income,) that means that the division did NOT use its                                           assets as effectively as.
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22.4-51Pentangle Company has prepared a preliminary cash budget for the 3rd quarter as shown below: Cash Budget Jul Aug Sep Beginning cash balance $32,000 $4,400 $6,900 Cash collections 49,400 51,000 44,600 Cash available 81,400 55,400 51,500 Cash payments:    Purchases of inventory 36,000 9,000 11,000    Operating expenses 41,000 30,500 30,900    Capital expenditures 0 9,000 7,700 Total cash payments $77,000 $48,500 $49,600.
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23.5-11Allbrand Company uses standard costs for their manufacturing division. Standards specify 0.1 direct labor                             hours per unit of product.  At the beginning of the year, the static budget for variable overhead costs                                           included the following data: Production volume:  5,000 units Estimated variable overhead costs:$12,500 Estimated direct labor hours:500.
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23.3-1Standard cost is a budget for a single unit of materials, labor or overhead. 23.3-2A standard cost is a carefully predetermined cost that usually is expressed on a per-unit basis.                   23.3-3Standard costs help motivate employees by serving as benchmarks against which their performance is                                           measured. 23.3-4A standard cost.
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22.4-58Craig Manufacturing Company’s budgeted income statement includes the following data: Data extracted from budgeted income statement Mar Apr May Jun Sales $120,000 $90,000 $95,000 $100,000 Commission expense - 15% of sales 18,000 13,500 14,250 15,000 Salary exp 30,000 30,000 30,000 30,000 Miscellaneous expense – 4% of sales 4,800 3,600 3,800 4,000 Rent expense 3,600 3,600 3,600 3,600 Utility expense 1,900 1,900.
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23. 6-13Alpine Productions uses a standard costing system for recording transactions; they also prepare an internal-use income statement using standard cost methodology.  At the end of 2011, Alpine reported the following data: Sales Revenues:$500,000 Cost of Goods Sold (standard costing)$382,500 Marketing & Admin expenses$105,000 Variances: Sales revenue $4,000 F Direct materials price variance 20 U Direct materials efficiency variance 300 F Direct labor.
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23.4-8Faas Marine Stores Company manufactures decorative fittings for luxury yachts which require highly                                           skilled labor, and special metallic materials.  Faas uses standard costs to prepare its flexible budget.  For                                           the first quarter of 2011, direct material and direct labor standards for one of their.
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24.3-7One part of the balanced scorecard helps management answer the question: “How do we look to                                           shareholders?”  Which of the four perspectives is being described here? A)    Financial perspective B)     Customer perspective C)     Internal business perspective D)    Learning and growth perspective 24.3-8One part of the balanced scorecard helps management answer the question:.
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24.4-19Rockland Heavy Industries has a sales division that focuses on power cranes.  The sales division is a                                           revenue center.  Below is a partially completed performance report for the month of June. Revenue Center Performance Report - $K Actual Flexible Budget Flexible Sales Volume Static Product type: Sales Revenue Variance U/F Budget Variance U/F Budget   Lightweight $10,900 $11,000 $10,000   Heavyweight $9,120 $9,000 $10,000.
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23.4-18Quick Tax Returns budgets 1.5 direct labor hours for every tax return that it prepares, at a standard          cost of $20 an hour.  During the most recent year, 500 returns were completed with the labor cost          totaling $17,600.  The actual labor cost was $22 per hour during that.
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24.4-9Waycross Construction Company has a pipeyard operation which is run as a cost center.  They are                                           preparing a performance report for the month of March and have provided the data below: Cost Center Flexible Flexible Budget Performance Report Actual Budget Variance U/F % variance U/F Wages & benefits $81,200 $80,000 Office lease expense 42,060 45,000 Depreciation expense 39,600 42,000 Insurance expense 33,490.
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23.4-42Faas Marine Stores Company manufactures decorative fittings for luxury yachts which require highly                                           skilled labor, and special metallic materials.  Faas uses standard costs to prepare its flexible budget.  For                                           the first quarter of 2011, direct material and direct labor standards for one of their.
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23.1-21Portobello Company prepared the following static budget for the coming month: Static Budget Units/volume 5,000 Per Unit Sales revenue $3.00 $15,000 Variable expenses $1.80 9,000 Contribution margin 6,000 Fixed expenses 5,000 Operating income/(loss) $1,000 Using the format below, please prepare a flexible budget including data at volumes of 4,000 and 6,000                                           units. Flexible Budget Units/volume 4,000 5,000 6,000 Per.
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22.6-26Henderson Industrial Products uses a centralized service department for procurement of raw materials,                                                                       servicing all three of its divisions: Construction, Manufacturing, and Military.  The Construction Division                                                         has been allocated a total of $192,000 of costs from the procurement department.  Of that.
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24.5-31Recreation Equipment Company has several divisions which are investment centers.  Data for the Boat                                           Division and the Trailer Division are shown here: Boat Division Trailer Division Operating income $90,000 $36,000 Total assets at Jan 1 $670,000 $230,000 Total assets at Dec 31 $710,000 $220,000 Which of the following statements would be the MOST.
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23.6-12Atlas Manufacturing is closing the year 2012.  Atlas uses standard costing methodology in its accounting                                           system and for internal performance reporting.  Atlas’s ending balances are shown here: Sales revenue (standard) Sales revenue variance Cost of goods sold (standard) Selling & admin expense 150,000 4,000 78,000 60,000 Direct materials price variance Direct materials efficiency.
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24.3-17Many companies use a balanced scorecard for performance evaluation.  The balanced scorecard has four                                           business perspectives, and utilizes KPIs to evaluate performance in various areas.  Which of the following                             KPIs would relate to the financial perspective? A)  Hours of employee training B)  Number of warranty claims C)  Percentage.
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24.5-41Huntswell Corporation has two major divisions—Agricultural Products and Industrial Products.  Data for                                           the year just finished is as follows: Agriculture Division Industrial Division Sales revenue $140,000 $1,040,000 Operating income $16,400 $220,000 Average assets $300,000 $5,540,000 Target rate of return 4.0% 4.0% For the Agricultural Division, how much is the asset turnover? A)  41.1% B)  46.7% C)  49.9% D)  51.2% 24.5-42Huntswell Corporation.
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23.1-11Portobello Company prepared the following static budget for the coming month: Static Budget Units/volume 5,000 Per Unit Sales revenue $3.00 $15,000 Variable expenses $1.80 9,000 Contribution margin 6,000 Fixed expenses 5,000 Operating income/(loss) $1,000 If a flexible budget was prepared at a volume of 6,000, how much would the operating income be? A)    ($200) B)     $   500 C)     $2,200 D)    $1,000 23.1-12Ibis Company.
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23.2-36Onyx Company prepared a static budget at the beginning of the month.  At the end of the month, the                                           company is analyzing actual results versus budget using flexible budget methodology.  Data are as                                           follows: Static budget:  Sales volume: 1,000 unitsPrice: $70 per unit Variable expense:  $32.
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23.2-29Tiger's Golf Center reported actual operating income for the current year of $60,000.  The flexible budget                                           operating income for actual volume achieved is $55,000, while the static budget operating income is                                           $58,000.  What is the flexible budget variance for operating income? A) $5,000 favorable.
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23.2-19A company is analyzing month-end results compared to both static and flexible budgets.  This month the actual variable expenses per unit were lower than projected in the static budget. What kind of variance would that produce? A)  Favorable flexible budget variance for variable expenses B)  Favorable sales volume variance for variable expenses C) .
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23.4-28Raymie Food Products is famous for their specialty fruit cake.  The main ingredient of the cake is dried                                           fruit, which Raymie purchases by the pound.  In addition, the production requires a certain amount of                                           direct labor. Raymie uses a standard cost system, and at.
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Multiple Choice Questions 1.A business combination occurs when a company acquires an equity interest in another entity and has: a.at least 20% ownership in the entity. b.more than 50% ownership in the entity. c.100% ownership in the entity. d.control over the entity, irrespective of the percentage owned. 2.A business entity becomes the subsidiary of another.
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22.6-6Which of the following BEST describes a business unit where the manager is primarily responsible for cost control? A)    Profit center B)     Investment center C)     Revenue center D)    Cost center 22.6-7Which of the following BEST describes a business unit where the manager is primarily responsible for generating sales revenue? A)    Profit center B)     Investment center C)     Revenue center D)    Cost.
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24.5-21To evaluate the performance of an investment center, a business needs KPIs that measure: A)    manufacturing productivity and product defect rate. B)     operating income and the efficient use of assets. C)     customer satisfaction and market share. D)    generation of  sales revenues and control of operating expenses. 24.5-22Investment centers need KPIs to evaluate how efficiently the.
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23.4-40Faas Marine Stores Company manufactures decorative fittings for luxury yachts which require highly                                           skilled labor, and special metallic materials.  Faas uses standard costs to prepare its flexible budget.  For                                           the first quarter of 2011, direct material and direct labor standards for one of their.
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22.6-33Henderson Industrial Products Company has three divisions—Construction, Manufacturing, and Military.  It has also identified costs associated with several common service departments and has traced those costs to each division.  The Construction Division Income Statement is shown here: Construction Division Income Statement Division Total Civil Residential Commercial Sales revenue $350,000 $36,000 $98,000 $216,000 Variable expenses $125,000 $24,000 $41,000 $60,000 Contribution.
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24.3-27In a balanced scorecard system, if employee excellence was one of the critical factors, which of the                                           following would be a relevant KPI? A)    Revenue growth B)     Production yield rate C)     Market share D)    Employee training hours 24.3-28In a balanced scorecard system, if financial profitability was one of the critical factors, which.
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24.4-30Zhongfang Consumer Products has a small car division that operates as a profit center. Below is a                                           partially completed performance report for the first quarter.  Please complete the report in the format                                           below. Profit Center Performance Report Flexible Budget Actual Flexible Budget Variance U/F % variance U/F Sales Revenue $688,000 $700,000 Variable expenses 309,000 320,000.
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24.3-37When measuring a company’s performance, which of the following is NOT a lag indicator? A) Operating income for the last month B) Ratio analysis C) Variance analysis D) The expected growth in future demand for a company’s products 24.3-38Which of the following is a lagging indicator? A)  Operational performance B)  Customer satisfaction C)  Financial performance D)  Employee training 24.4-1When companies.
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22.5-1When companies use an enterprise resource planning system to roll up or consolidate the budgets of the                                                                       individual business units, it is more difficult for managers to conduct sensitivity analysis on their own                                                                       budget data. 22.5-2Budgets are compared to actual results.
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24.4-32Tavares Manufactured Homes Company has a sales division which submits a monthly performance report                             as a revenue center.  Please complete the report using the format and data below. Revenue Center Performance Report - $K Actual Flexible Budget Flexible Sales Volume Static Product type: Sales Revenue Variance U/F Budget Variance U/F Budget   Model A $11,200 $12,000 $10,000   Model B1 $3,300 $3,000 $5,000   Model.
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22.4-61AAA Company is preparing its 3rd quarter budget and provides the following data: Jul Aug Sep Cash collections $50,000 $40,000 $48,000 Cash payments:    Purchases of inventory 31,000 22,000 18,000    Operating expenses 12,000 9,000 11,600    Capital expenditures 13,000 25,000 0 Cash balance at June 30 is projected to be $4,000.  The company is required to maintain a.
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23.5-1When completing a standard costing income statement, favorable variances for direct materials or direct                                           labor will go to reduce the “cost of goods sold at standard cost.” 23.5-2When completing a standard costing income statement, unfavorable variances for direct materials or                                           direct labor will go to.
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22.4-59California Products Company has the following data as part of its budget for the 2nd quarter: Apr May Jun Cash collections $30,000 $32,000 $36,000 Cash payments:    Purchases of inventory 4,500 4,600 3,800    Operating expenses 7,200 7,600 8,000    Capital expenditures 0 24,500 5,200 The cash balance at April 1 is forecast to be $8,200.  Please prepare a.
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24.2-2Companies benchmark their performance against the performance of their competitors and also against                                           their own past performance. 24.2-3Decentralization increases the difficulty of achieving goal congruence among managers. 24.2-4If a manager’s performance is evaluated solely on the ability to control costs, he or she may sacrifice                                           quality.
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23.1-1 A static budget is prepared for one level of sales volume.                   23.1-2A favorable variance reflects an increase in operating income. 23.1-3A variance is the difference between an actual amount and a budgeted amount. 23.1-4Flexible budgets are budgets that summarize cost and revenue information at various volume levels                                          .
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24.1-11A product line at Coca-Cola is most likely treated as a(n): A) cost center. B) revenue center. C) profit center. D) investment center. 24.1-12Which of the following is a cost center? A) A company’s legal department B) A company’s sales department C) A product line of a particular company D) A company’s individual stores 24.1-13Which of the following would be.
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22.6-16Henderson Industrial Products uses a centralized service department for procurement of raw materials,                                                                       servicing all three of its divisions—Construction, Manufacturing, and Military.  The total monthly costs of the procurement department are $480,000.  Of these costs, 80% are traceable to the divisions, and 20% are considered untraceable. .
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23.5-21Quality Brand Products uses standard costing to manage their direct costs and their overhead costs.                                           Overhead costs are allocated based on direct labor hours.  In the first quarter, Discount Brand had an                                           unfavorable efficiency variance for their variable overhead costs.  Which of the following.
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23.3-21Georgia Custom Cabinet Company is setting standard costs for one of its products.  The main material is                                           cedar wood, sold by the board foot.  The current cost of cedar wood is $2.00 per board foot from the                                           supplier.  Delivery costs are $0.25 per board.
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