Budgeting
Performance Measures I
Responsibility Centres
Performance Measures II
100
A master budget usually includes projected tax returns. True or False?
False!!!
100
Using the performance measure of Residual Income may lead to goal incongruence. True or False?
FALSE.
100
The hotel manager is in charge of a ______ because the manager is accountable for both revenues and costs.
Profit Centre
100
The use of Residual Income to evaluate division managers may lead to managers rejecting projects to increase their Residual Income score (Their interests > Company's Interests). True or False?
False!
200
The _______ Budget lists all product costs, with the exception of direct labour and materials.
Manufacturing
200
The use of Return on Investment (ROI) to evaluate division managers may lead to managers rejecting projects to increase their Residual Income score (Their interests > Company's Interests). True or False?
Tru dat
200
A cost centre has control over incurrence of cost, but no control over __________.
Revenues or Investment Funds (either is acceptable)
200
After writing off a large amount of obsolete inventory, capital turnover would (A) Increase, (B) Decrease or (C) Not Change.
(A) Increase
300
Benefits derived from budgeting do not include improved relationship with shareholders. True or False?
True.
300
Banana Inc. has invested $1 million in the assets assigned to its Idaho subsidiary. As an investment center, the facility is judged based on its return on invested funds. The subsidiary must meet an annual return on investment target of 12%. In its most recent accounting period, Idaho has generated net income of $180,000. Calculate their Residual Income.
60,000
300
A profit centre has no control over investment funds. True or False?
True!
300
Dumb Starbucks purchased some equipment in June that increased the quality of the drinks produced, but had no immediate effect on sales. Residual Income would (A) Increase, (B) Decrease or (C) Not Change.
(B) Decrease
400
A budget is a financial plan to help reach a company's _______ and _____ goals.
Operational and Financial
400
What is the formula for Return on Investment (ROI)?
Operating Income/Average Investment
400
The regional manager responsible for determining the amount to be invested in new hotel projects and for revenues and cost generated from these investments is in charge of a ________
Investment Centre
400
WacDonalds Industries requires that all divisions generate a minimum return on invested assets of 8 percent. The Snack Division's operating margin for the year was $9,099,000, during which time its average invested capital was $55,137,000. Calculate the Snack Division's return on investment.
16.5%
500
A static budget shows how much should be spent at a planned activity level. True or False?
True
500
What is the formula for Investment Charge?
Average Investment x Minimum rate of return
500
A revenue centre has control and responsibility over (A) Costs, (B) Revenues, (C) Investment Funds or (D) Profits
(B) Revenues
500
Five Leaves' Corporate HQ lowers their division's target rate of return from 15 percent to 12 percent because of the decreasing cost of debt. Return on Investment (ROI) would (A) Increase, (B) Decrease, (C) Not Change
(C) Not Change.
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