Principles of Accounting Volume 2
19th Edition
ISBN: 9781947172609
Author: OpenStax
Publisher: OpenStax College
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Textbook Question
Chapter 12, Problem 13MC
Which of the following measures the profitability of a division relative to the size of its investment in capital assets?
A. residual Income (RI)
B. sales margin
C.
D. economic value added (EVA)
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Check out a sample textbook solutionStudents have asked these similar questions
Calculate residual income (RI) for each division using operating income as a measure of income and total assets minus current liabilities as a measure of investment.
A responsibility center structure that considers investments made by the operating segments by using a common cost of capital percentage is called ________.
A) residual income
B) a profit center
C) a discretionary cost center
D) return on investment
The residual income approach to measuring divisional performance measurement is closely related to the ____________ method of performance measurement.
Select one:
a.
Internal rate of return
b.
Payback period
c.
Return on capital employed
d.
Accounting rate of return
e.
Economic value added
Chapter 12 Solutions
Principles of Accounting Volume 2
Ch. 12 - Components of the organization that are...Ch. 12 - When managerial accountants design an evaluation...Ch. 12 - Goal congruence in well-designed performance...Ch. 12 - Responsibility accounting holds managers...Ch. 12 - Performance measures are only useful if _______....Ch. 12 - Which of the following is not a characteristic of...Ch. 12 - A good performance measurement system will align...Ch. 12 - What should an organization do if performance...Ch. 12 - A good performance measurement system will include...Ch. 12 - Without proper performance measures, goal...
Ch. 12 - Dixon Construction Materials has collected this...Ch. 12 - The cost of equity is _______. A. the interest...Ch. 12 - Which of the following measures the profitability...Ch. 12 - The capital structure of Ridley Enterprises Is:...Ch. 12 - Calculate the ROI for Gardner Chemical given the...Ch. 12 - Which of the following statements is false? A. The...Ch. 12 - The metrics based on nonfinancial information are...Ch. 12 - The metrics based on financial numbers produced by...Ch. 12 - People affected by decisions made by a company,...Ch. 12 - The owners of company stock are ______. A....Ch. 12 - Why might a manager focused solely on accounting...Ch. 12 - Is there a way to prevent managers from focusing...Ch. 12 - Should an organization focus on controllable or...Ch. 12 - What are the components of a strategic plan? Find...Ch. 12 - What are the four types of centers and their...Ch. 12 - What would be wrong with using two points of data...Ch. 12 - Compare and contrast short- and long-term goals...Ch. 12 - Can a short-term goal also be a long-term goal?...Ch. 12 - What does goal congruence mean? Provide an example...Ch. 12 - What are the six characteristics of a good...Ch. 12 - What is EVA and why is it superior to other...Ch. 12 - What are the drawbacks to ROI? Give examples of...Ch. 12 - Describe the history and purpose of the balanced...Ch. 12 - What are the characteristics of successful...Ch. 12 - For the following situations, identify whether the...Ch. 12 - For the following descriptions state whether the...Ch. 12 - Identify the type of responsibility center...Ch. 12 - Sara has just taken a job as the middle school...Ch. 12 - During the current year, Sokowski Manufacturing...Ch. 12 - During the current year, Sokowski Manufacturing...Ch. 12 - Assume Skyler Industries has debt of $4,500,000...Ch. 12 - Why do managers want a high ROI, and how would...Ch. 12 - Classify each of the following performance...Ch. 12 - For the following situations identify whether the...Ch. 12 - For the following descriptions, state whether the...Ch. 12 - Identify the type of responsibility center...Ch. 12 - Padma completed her doctoral degree and has taken...Ch. 12 - During the current year. Plainfield Manufacturing...Ch. 12 - During the current year, Plainfield Manufacturing...Ch. 12 - Assume Plainfield Manufacturing has debt of...Ch. 12 - Though a high ROI is desired, what are some...Ch. 12 - Classify each of the following performance...Ch. 12 - Match each of the following with its appropriate...Ch. 12 - Florentino Allers is the production manager of...Ch. 12 - Macon Mills is a division of Bolin Products. Inc....Ch. 12 - Jefferson Memorial Hospital is an investment...Ch. 12 - Crawfords Books and Things has a traditional...Ch. 12 - Coral Creations has strategic plans that call for...Ch. 12 - Match each of the following with its appropriate...Ch. 12 - Oleg Markov is the production manager of NASA...Ch. 12 - Evaluate the two departments for Moxie Products....Ch. 12 - Banyan Industries has two divisions, a tax rate of...Ch. 12 - Forty years ago, Vinfen was founded as a nonprofit...Ch. 12 - What combination of quantitative factors and...Ch. 12 - Josh OShea is the manager of the...Ch. 12 - Kanye Achebe just became the operations manager of...Ch. 12 - Which of the performance measures—ROI, RI, or...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- A responsibility center structure that considers investments made by the operating segments by using a common cost of capital percentage is called_______. A. return on investment B. residual income C. a profit center D. a discretionary cost centerarrow_forwardWhat procedures can be used to estimate the risk-adjusted cost of capital for a particular division? What approaches are used to measure a division’s beta?arrow_forwardWhich of the following statements is true? a. The fixed asset turnover ratio assists managers in determining the estimated future capital expenditures that are needed. b. The average age of the fixed assets is computed by dividing accumulated depreciation by depreciation expense. c. If net sales increases, the fixed asset turnover ratio will decrease. d. A relatively low fixed asset turnover ratio signals that a company is efficiently using its assets.arrow_forward
- What concept is critical in distinguishing an enterprise’s return on investment from return of its investment? Capital maintenance concept Current operating performance concept Comprehensive income concept Return on investment conceptarrow_forwardWhat procedures can be used to estimate the riskadjusted cost of capital for a particular division?What approaches are used to measure a division’sbeta?arrow_forwardDiscuss the following profitability ratios: Profit Margin, ROA-Return on Assets, ROI-Return on Investment, and the Gross Margin.arrow_forward
- Which of the following statements is NOT a benefit of return on investment (ROI) as a measure of the financial performance of divisions? a. It is a relative measure and allows divisions of different sizes to be compared b. The percentage calculated can be compared with the return required by investors. c. The performance of a division can be tracked over time (since a percentage is calculated). d. It can provide a disincentive to invest, or force the sale of assets, in order to better the return.arrow_forwardUse after-tax operating income and the individual cost of capital of each division to calculate residual income and compare.arrow_forwardWhat are the instances that the return of investment of a division is significantly larger than the return of investment of the entire company? And, why?arrow_forward
- Calculate return on investment (ROI) for each division using operating income as a measure of income and total assets as a measure of investment.arrow_forwarda) Based on the information provided, calculate the operating income in good format. Show all calculations. b) Calculate the individual and net Growth Component. c) Calculate the individual and net Price Recovery. d) Calculate the Productivity Component e) Show the reconciliation of the Operating Incomearrow_forwardExplain the meaning of the undernoted measures that may be used for divisional performance measurement and investment decision-making. Discuss the advantages and problems associated with: Return of capital employedarrow_forward
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