Chapter 11 - Test Bank.doc

7/22/2019 Chapter 11 - Test Bank.doc

1/86

Chapter 11 - Performance Measurement in Decentralized Organizations

QuestionType D

ifficulty

LO1:ROI

LO2:Residualincome

LO3:Operatingperfo

rmancemeasures

LO4:Balancedscore

card

Otertopics

!rofessional"#am$

dapted

ID Origin %&$'%!$ origin

1 T/F E x x 3/e: 11-9 Authors

2 T/F H x x 5/e: 11-8 Authors

3 T/F M x 4/e: 11-658 Authors

4 T/F M x New, 1/31/95,E E.N.

5 T/F E x 4/e: 11-657 Authors

6 T/F M x 8/e:AT12-23 !"#$% &e'es

7 T/F M x 11/26/97,E E.N.

8 T/F M x 11/26/97,( E.N.

9 T/F E x 11/26/97,M E.N.1) T/F E x 1/e: 11-6 Authors

11 T/F M x 3/e: 11-2 Authors

12*o+etu"

M/* M x x 7/e: 12-65 *MA

13*o+etu"

M/* E x 3/e: 11-2 Authors

14*o+etu"

M/* M x 5/e: 11-23 Authors

15*o+etu"

M/* M x 5/e: 11-29 Authors16 *o+etu" E x 5/e: 11-53 Authors

11-1


2/86


M/*

17*o+etu"

M/* M x 8/e:AT12-33 !"#$% &e'es

18*o+etu"


19*o+etu"

M/* M x 9e(!:*H12,3("rr'!ee

2)*o+etu"


21*o+etu"

M/* E x 8/e:AT12-28 !"#$% &e'es

22 M/* M x 11/e: AT 12-41 0"+%r" ("+

23 M/* M x 5/e: 11-16 Authors

24 M/* H x 3/e: 11-6 Authors

25 M/* H x 2/e: 1)-3 Authors

26 M/* E x 11/e: AT 12-32 0"+%r" ("+

27 M/* E x9/29/2))4 Mut$ M*E4 E.N.

28 M/* E x9/29/2))4 Mut$ M*F4 E.N.

29 M/* H x x 4/e: 11-672 Authors

3) M/* E x9/14/2))4 0$+e M*AH4 E.N.

31 M/* E x9/14/2))4 0$+e M*AE4 E.N.

32 M/* E x 9/14/2))4 0$+e M*A4 E.N.

33 M/* E x9/14/2))4 0$+e M*A4 E.N.

34 M/* E x9/14/2))4 0$+e M*A4 E.N.

35 M/* E x9/14/2))4 0$+e M*AF4 E.N.

11(1

36-38

Mut$"rtM/* E x New,4/27/)2,A7 E.N.

11(2

39-42

Mut$"rtM/*

M-H x 5/e: 11-44 to 47 Authors

11( 43- Mut$"rt E x New,4/27/)2,7 E.N.

11-2


3/86


3 45 M/*11(4

46-47

Mut$"rtM/* E x

9/29/2))4 Mut$ M*!4 E.N.

11()

48-49

Mut$"rtM/* E x

9/29/2))4 Mut$ M*E4 E.N.

11(*

5)-52

Mut$"rtM/*

M-H x x 4/e: 11-7)1 to 7)5 Authors

11(+

53-55

Mut$"rtM/* H x x 6/e: 11-21 to 24 Authors

11(,

56-59

Mut$"rtM/* H x x 5/e: 11-3) to 33 Authors

11(-

6)-61

Mut$"rtM/* H x x 4/e: 11-678 to 682 Authors

11(1.

62-64

Mut$"rtM/* H x x 5/e: 11-36 to 4) Authors

11(11

65-68

Mut$"rtM/* E x x New,4/27/)2,!7 E.N.

11(12

69-72

Mut$"rtM/* E x x New,4/27/)2,*7 E.N.

11(13

73-75

Mut$"rtM/* E x

9/15/2))5 Mut$ M*!4 E.N.

11(14

76-78

Mut$"rtM/* H x 6/e: 9-28 to 3) Authors

11(1)

79-81

Mut$"rtM/* E x

9/15/2))4 Mut$ M**4 E.N.

82 roe E x New,4/27/2))2,H6 E.N.

83 roe E x New,4/27/2))2,7 E.N.

84 roe E x x New,4/27/2))2,F6 E.N.

85 roe M x x New,2/1/95,* E.N.

86 roe E x x New,4/27/2))2,E7 E.N.

87 roe E x New,4/27/2))2,7 E.N.

88 roe E x9/29/2))4 roeE4 E.N.

89 roe E x9/29/2))4 roe!4 E.N.

9) roe E x EN 4/21/2))3 N4 E.N.

91 roe M x EN 4/21/2))3 4 E.N.

11-3


4/86


92 roe E x9/15/2))4 roe4 E.N.

93 roe H x EN 4/21/2))3 4 E.N.

11-4


5/86


Chapter 11

Performance Measurement in Decentralized Organizations

True / False Questions

1. Residual income is superior to return on inestment as a means of measuring performance!ecause it encourages managers to ma"e inestment decisions that are more consistent #iththe interests of the compan$ as a #hole.%rue &alse

2. Residual income e'uals aerage operating assets multiplied !$ the difference !et#een thereturn on inestment and the minimum re'uired rate of return.%rue &alse

3. Consider a compan$ that has onl$ aria!le costs. (ll other things the same) an increase inunit sales #ill result in no change in the return on inestment.%rue &alse

4. %he use of return on inestment as a performance measure ma$ lead managers to ma"edecisions that are not in the !est interests of the compan$ as a #hole.

%rue &alse

*. Residual income is the net operating income that an inestment center earns a!oe theminimum re'uired return on the inestment in operating assets.%rue &alse

+. Residual income should not !e used to ealuate a cost center.

%rue &alse

11-4


6/86


,. %he performance measures on a !alanced scorecard tend to fall into four groups financialmeasures) customer measures) internal !usiness process measures) and eternal !usinessprocess measures.%rue &alse

/. ( !alanced scorecard should contain eer$ performance measure that can !e epected toinfluence a compan$0s profits.%rue &alse

. %he performance measures on an indiidual0s scorecard should not !e oerl$ influenced !$actions ta"en !$ others in the compan$ or !$ eents that are outside of the indiidual0s

control.%rue &alse

1. Managers of cost centers are ealuated according to the profits #hich their departmentsare a!le to generate.%rue &alse

11. f epenses eceed reenues in a department) then it #ould !e considered a cost center.%rue &alse

Multiple Choice Questions

12. Residual income is a !etter measure for performance ealuation of an inestment centermanager than return on inestment !ecause(. the pro!lems associated #ith measuring the asset !ase are eliminated.

. desira!le inestment decisions #ill not !e re5ected !$ diisions that alread$ hae a highRO.C. onl$ the gross !oo" alue of assets needs to !e calculated.D. returns do not increase as assets are depreciated.

11-*


7/86


13. %urnoer is computed !$ diiding aerage operating assets into(. inested capital.. total assets.C. net operating income.

D. sales.

14. 6hich of the follo#ing statements proide7s8 an argument in faor of including onl$ aplant0s net !oo" alue rather than gross !oo" alue as part of operating assets in the ROcomputation9. :et !oo" alue is consistent #ith ho# plant and e'uipment items are reported on a !alancesheet.. :et !oo" alue is consistent #ith the computation of net operating income) #hich includesdepreciation as an operating epense.

. :et !oo" alue allo#s RO to decrease oer time as assets get older.(. Onl$ .. Onl$ .C. Onl$ and .D. Onl$ and .

1*. n computing the margin in a RO anal$sis) #hich of the follo#ing is used9(. ;ales in the denominator. :et operating income in the denominator

C. (erage operating assets in the denominatorD. Residual income in the denominator

1+. 6hich of the follo#ing is not an operating asset9(. Cash. nentor$C. Plant e'uipmentD. Common stoc"

11-+


8/86


1,. n determining the dollar amount to use for operating assets in the return on inestment7RO8 calculation) companies #ill generall$ use either net !oo" alue or gross cost of theassets. 6hich of the follo#ing is an argument for the use of net !oo" alue rather than grosscost9

(. t is consistent #ith ho# assets are reported on the !alance sheet.. t eliminates the depreciation method as a factor in RO calculations.C. t encourages the replacement of old) #orn-out e'uipment.D. (ll of the a!oe.

1/. 6hich of the follo#ing #ill not result in an increase in the residual income) assumingother factors remain constant9(. (n increase in sales.. (n increase in the minimum re'uired rate of return.

C. ( decrease in epenses.D. ( decrease in operating assets.

1. (ll other things the same) #hich of the follo#ing #ould increase residual income9(. ncrease in aerage operating assets.. Decrease in aerage operating assets.C. ncrease in minimum re'uired return.D. Decrease in net operating income.

2. 6hich of the follo#ing three statements are correct9. ( profit center has control oer !oth cost and reenue.. (n inestment center has control oer inested funds) !ut not oer costs and reenue.. ( cost center has no control oer sales.(. Onl$ . Onl$ C. Onl$ and D. Onl$ and

11-,


9/86


21. %he purpose of the Data Processing Department of &alena Corporation is to assist thearious departments of the corporation #ith their information needs free of charge. %he DataProcessing Department #ould !est !e ealuated as a(. cost center.

. reenue center.C. profit center.D. inestment center.

22. (erage operating assets are


10/86


2*. Reed Compan$0s sales last $ear totaled


11/86


2. Diision had an RO last $ear of 1*=. %he diision0s minimum re'uired rate of return is1=. f the diision0s aerage operating assets last $ear #ere


12/86


32. oster Corporation "eeps careful trac" of the time re'uired to fill orders. %he timesrecorded for a particular order appear !elo#

%he throughput time #as(. /. hours. 1/ hoursC. 4.* hoursD. 22.* hours

33. otelho Corporation "eeps careful trac" of the time re'uired to fill orders. Dataconcerning a particular order appear !elo#

%he delier$ c$cle time #as(. 33.1 hours

. 3., hoursC. 12.+ hoursD. 3. hours

11-11


13/86


34. :iemiec Corporation "eeps careful trac" of the time re'uired to fill orders. %he timesrecorded for a particular order appear !elo#

%he manufacturing c$cle efficienc$ 7MC8 #as closest to(. .2. .+C. .12D. .+

3*. Mordue Corporation "eeps careful trac" of the time re'uired to fill orders. Dataconcerning a particular order appear !elo#

%he manufacturing c$cle efficienc$ 7MC8 #as closest to(. .1*. .*3

C. .*D. .1+

(ide ndustries is a diision of a ma5or corporation. Data concerning the most recent $earappears !elo#

11-12


14/86


3+. %he diision0s margin is closest to(. 21./=. *.=C. 23.=

D. 2/.=

3,. %he diision0s turnoer is closest to(. 2.. 4.3*C. .22D. 3.*,

3/. %he diision0s return on inestment 7RO8 is closest to(. 4.1=. 21.,*=C. 1,.=D. 1.1=

%he Reed Diision reports the follo#ing operating data for the past t#o $ears

%he return on inestment at Reed #as eactl$ the same in Eear 1 and Eear 2.

3. %he margin in Eear 2 #as(. 4/=

. 32=C. 2=D. 1=

11-13


15/86


4. ;ales in Eear 2 amounted to(.


16/86


4*. %he diision0s return on inestment 7RO8 is closest to(. 1.=. 1+.+=C. 1.+=

D. *.,=

%he 6est Diision of ;he"archi Corporation had aerage operating assets of


17/86


4. 6hat #as the Consumer Products Diision0s residual income in March9(. -


18/86


Operating data from %indall Compan$ for last $ear follo#s

*3. %he aerage operating assets amounted to(.


19/86


*+. ;ales in Eear 1 amounted to(.


20/86


+. o# man$ units must ;outh sell each $ear to hae an RO of 1+=9(. 24). 1)3)C. *2)

D. +*)

+1. f ;outh #ants a residual income of


21/86


+4. %he minimum re'uired rate of return in Eear 1 #as(. 1/=. 1,=C. 1+=

D. 1*=

Dic"onson Products is a diision of a ma5or corporation. %he follo#ing data are for the last$ear of operations

+*. %he diision0s margin is closest to(. 2+.4=. 1.=C. 2.4=D. 24.=

++. %he diision0s turnoer is closest to

(. 3.,/. 41.+,C. 4.1+D. .1

+,. %he diision0s return on inestment 7RO8 is closest to(. .2=. 41.+=C. 1.=

D. 1.=

11-2


22/86


+/. %he diision0s residual income is closest to(.


23/86


,2. %he diision0s residual income is closest to(.


24/86


art Manufacturing operates an automated steel fa!rication process. &or one operation) arthas found that 4*= of the total throughput 7manufacturing c$cle8 time is spent on non-alue-added actiities. Delier$ c$cle time is 12 hours) #aiting time during the production processis 3 hours) 'ueue time prior to starting the production process is 2 hours) and inspection time

is 1.2 hours.

,+. %he manufacturing c$cle efficienc$ 7MC8 for this operation is(. **=. 4*=C. +.+ hoursD. *.4 hours

,,. 6hat is the moe time recorded for the operation9(. 1.* hours. +.* hoursC. *./ hoursD. ./* hours

,/. 6hat is the throughput 7manufacturing c$cle8 time for the operation9(. 12. hours

. . hoursC. 1. hoursD. *./ hours

;affer Corporation "eeps careful trac" of the time re'uired to fill orders. Data concerning aparticular order appear !elo#

11-23


25/86


,. %he throughput time #as(. .3 hours. 4. hoursC. 3. hours

D. 2+ hours

/. %he manufacturing c$cle efficienc$ 7MC8 #as closest to(. .1,. .*C. .43D. .1

/1. %he delier$ c$cle time #as(. ,.* hours. 2.1 hoursC. 3. hoursD. 3.1 hours

Essay Questions

/2. eae$ &a!rication is a diision of a ma5or corporation. >ast $ear the diision had totalsales of


26/86


/3. Bilde ndustries is a diision of a ma5or corporation. >ast $ear the diision had total salesof


27/86


/*. &inancial data for 6indsor) nc. for last $ear appear !elo#

%he compan$ paid diidends of


28/86


/+. c"els 6ares is a diision of a ma5or corporation. %he follo#ing data are for the latest$ear of operations

Re'uireda. 6hat is the diision0s margin9!. 6hat is the diision0s turnoer9c. 6hat is the diision0s return on inestment 7RO89d. 6hat is the diision0s residual income9

/,. les ndustries is a diision of a ma5or corporation. %he follo#ing data are for the latest$ear of operations

Re'uired6hat is the diision0s residual income9

11-2,


29/86


//. %he Cas"et Diision of Rosencranz Corporation had aerage operating assets of


30/86


. Aaster Corporation0s management "eeps trac" of the time it ta"es to process orders. Duringthe most recent month) the follo#ing aerage times #ere recorded per order

Re'uireda. Compute the throughput time.!. Compute the manufacturing c$cle efficienc$ 7MC8.c. 6hat percentage of the production time is spent in non-alue-added actiities9d. Compute the delier$ c$cle time.

1. During the most recent month at Coggan Corporation) 'ueue time #as *.3 da$s)inspection time #as .* da$) process time #as 1. da$s) #ait time #as 4.* da$s) and moetime #as .* da$.Re'uireda. Compute the throughput time.

!. Compute the manufacturing c$cle efficienc$ 7MC8.c. 6hat percentage of the production time is spent in non-alue-added actiities9d. Compute the delier$ c$cle time.

11-2


31/86


2. Dur"ee Corporation "eeps careful trac" of the time re'uired to fill orders. %he timesre'uired for a particular order appear !elo#

Re'uireda. Determine the throughput time. ;ho# $our #or"G!. Determine the manufacturing c$cle efficienc$ 7MC8. ;ho# $our #or"Gc. Determine the delier$ c$cle time. ;ho# $our #or"G

3. 6altner Corporation0s management reports that its aerage delier$ c$cle time is 2.da$s) its aerage throughput time is ,.* da$s) its manufacturing c$cle efficienc$ 7MC8 is.32) its aerage moe time is .2 da$) and its aerage 'ueue time is 4. da$s.Re'uireda. 6hat is the #ait time9!. 6hat is the process time9

c. 6hat is the inspection time9

11-3


32/86


Chapter 11 Performance Measurement in Decentralized Organizations (ns#erHe$

True / False Questions

1. Residual income is superior to return on inestment as a means of measuring performance!ecause it encourages managers to ma"e inestment decisions that are more consistent #iththe interests of the compan$ as a #hole.T!E

AACSB: Reflective Thinking

AICPA BB: Critical Thinking

AICPA FN: MeasurementBloom's: no!le"ge

#earning $%&ective: () Com*ute return on investment +R$I, an" sho! ho! changes in sales- e.*enses- an" assets affect R$I

#earning $%&ective: ()/ Com*ute resi"ual income an" un"erstan" its strengths an" !eaknesses

#evel: 0as1

2. Residual income e'uals aerage operating assets multiplied !$ the difference !et#een thereturn on inestment and the minimum re'uired rate of return.T!E



AICPA FN: MeasurementBloom's: Com*rehension



#evel: 2ar"

3. Consider a compan$ that has onl$ aria!le costs. (ll other things the same) an increase inunit sales #ill result in no change in the return on inestment.F"#$E



AICPA FN: Measurement

Bloom's: Com*rehension#earning $%&ective: () Com*ute return on investment +R$I, an" sho! ho! changes in sales- e.*enses- an" assets affect R$I

#evel: Me"ium

11-31


33/86


4. %he use of return on inestment as a performance measure ma$ lead managers to ma"edecisions that are not in the !est interests of the compan$ as a #hole.T!E





#evel: Me"ium

*. Residual income is the net operating income that an inestment center earns a!oe theminimum re'uired return on the inestment in operating assets.T!E




Bloom's: no!le"ge

#earning $%&ective: ()/ Com*ute resi"ual income an" un"erstan" its strengths an" !eaknesses#evel: 0as1

+. Residual income should not !e used to ealuate a cost center.T!E





#evel: Me"ium

,. %he performance measures on a !alanced scorecard tend to fall into four groups financialmeasures) customer measures) internal !usiness process measures) and eternal !usinessprocess measures.F"#$E




#earning $%&ective: ()3 4n"erstan" ho! to construct an" use a %alance" scorecar"

#evel: Me"ium

11-32


34/86


/. ( !alanced scorecard should contain eer$ performance measure that can !e epected toinfluence a compan$0s profits.F"#$E




Bloom's: Com*rehension#earning $%&ective: ()3 4n"erstan" ho! to construct an" use a %alance" scorecar"

#evel: Me"ium

. %he performance measures on an indiidual0s scorecard should not !e oerl$ influenced !$actions ta"en !$ others in the compan$ or !$ eents that are outside of the indiidual0scontrol.T!E




Bloom's: no!le"ge#earning $%&ective: ()3 4n"erstan" ho! to construct an" use a %alance" scorecar"

#evel: 0as1

1. Managers of cost centers are ealuated according to the profits #hich their departmentsare a!le to generate.

F"#$E




Bloom's: no!le"ge

#earning $%&ective: $ther to*ics#evel: 0as1

11. f epenses eceed reenues in a department) then it #ould !e considered a cost center.F"#$E




#earning $%&ective: $ther to*ics

#evel: Me"ium

11-33


35/86


Multiple Choice Questions

12. Residual income is a !etter measure for performance ealuation of an inestment center

manager than return on inestment !ecause(.the pro!lems associated #ith measuring the asset !ase are eliminated.%&desira!le inestment decisions #ill not !e re5ected !$ diisions that alread$ hae a highRO.C.onl$ the gross !oo" alue of assets needs to !e calculated.D.returns do not increase as assets are depreciated.




#earning $%&ective: () Com*ute return on investment +R$I, an" sho! ho! changes in sales- e.*enses- an" assets affect R$I#earning $%&ective: ()/ Com*ute resi"ual income an" un"erstan" its strengths an" !eaknesses

#evel: Me"ium

Source: CMA5 a"a*te"

13. %urnoer is computed !$ diiding aerage operating assets into(.inested capital..total assets.C.net operating income.D&sales.




Bloom's: no!le"ge#earning $%&ective: () Com*ute return on investment +R$I, an" sho! ho! changes in sales- e.*enses- an" assets affect R$I

#evel: 0as1

11-34


36/86


14. 6hich of the follo#ing statements proide7s8 an argument in faor of including onl$ aplant0s net !oo" alue rather than gross !oo" alue as part of operating assets in the ROcomputation9. :et !oo" alue is consistent #ith ho# plant and e'uipment items are reported on a !alance

sheet.. :et !oo" alue is consistent #ith the computation of net operating income) #hich includesdepreciation as an operating epense.. :et !oo" alue allo#s RO to decrease oer time as assets get older.(.Onl$ ..Onl$ .C&Onl$ and .D.Onl$ and .


AICPA BB: Critical ThinkingAICPA FN: Measurement

Bloom's: Com*rehension

#earning $%&ective: () Com*ute return on investment +R$I, an" sho! ho! changes in sales- e.*enses- an" assets affect R$I#evel: Me"ium

1*. n computing the margin in a RO anal$sis) #hich of the follo#ing is used9"&;ales in the denominator.:et operating income in the denominatorC.(erage operating assets in the denominatorD.Residual income in the denominator





#evel: Me"ium

11-3*


37/86


1+. 6hich of the follo#ing is not an operating asset9(.Cash.nentor$C.Plant e'uipment

D&Common stoc"

AACSB: Reflective ThinkingAICPA BB: Critical Thinking


Bloom's: no!le"ge


#evel: 0as1

1,. n determining the dollar amount to use for operating assets in the return on inestment7RO8 calculation) companies #ill generall$ use either net !oo" alue or gross cost of the

assets. 6hich of the follo#ing is an argument for the use of net !oo" alue rather than grosscost9(.t is consistent #ith ho# assets are reported on the !alance sheet..t eliminates the depreciation method as a factor in RO calculations.C.t encourages the replacement of old) #orn-out e'uipment.D&(ll of the a!oe.





#evel: Me"ium

1/. 6hich of the follo#ing #ill not result in an increase in the residual income) assumingother factors remain constant9(.(n increase in sales.%&(n increase in the minimum re'uired rate of return.C.( decrease in epenses.D.( decrease in operating assets.





#evel: Me"ium

11-3+


38/86


1. (ll other things the same) #hich of the follo#ing #ould increase residual income9(.ncrease in aerage operating assets.%&Decrease in aerage operating assets.C.ncrease in minimum re'uired return.

D.Decrease in net operating income.





#evel: Me"ium

2. 6hich of the follo#ing three statements are correct9. ( profit center has control oer !oth cost and reenue.

. (n inestment center has control oer inested funds) !ut not oer costs and reenue.. ( cost center has no control oer sales.(.Onl$ .Onl$ C&Onl$ and D.Onl$ and




Bloom's: Com*rehension#earning $%&ective: $ther to*ics

#evel: Me"ium

21. %he purpose of the Data Processing Department of &alena Corporation is to assist thearious departments of the corporation #ith their information needs free of charge. %he DataProcessing Department #ould !est !e ealuated as a"&cost center..reenue center.C.profit center.D.inestment center.




Bloom's: no!le"ge

#earning $%&ective: $ther to*ics#evel: 0as1

11-3,


39/86


22. (erage operating assets are


40/86


24. ;ales and aerage operating assets for Compan$ P and Compan$ ? are gien !elo#

6hat is the margin that each compan$ #ill hae to earn in order to generate a return oninestment of 2=9(.12= and 1+=.*= and 1=C&/= and 4=D.2.*= and *=

Compan$ P

%urnoer I ;ales (erage operating assets I


41/86


2*. Reed Compan$0s sales last $ear totaled


42/86


2,. ;oder'uist Corporation uses residual income to ealuate the performance of its diisions.%he compan$0s minimum re'uired rate of return is 11=. n (pril) the Commercial ProductsDiision had aerage operating assets of


43/86


2. Diision had an RO last $ear of 1*=. %he diision0s minimum re'uired rate of return is1=. f the diision0s aerage operating assets last $ear #ere


44/86


3. Barnic" Corporation "eeps careful trac" of the time re'uired to fill orders. %he timesrecorded for a particular order appear !elo#

%he delier$ c$cle time #as(.3.* hours./., hoursC.34. hoursD&3+.1 hours

%hroughput time I Process time J nspection time J Moe time J ?ueue timeI . hours J .3 hours J 3.* hours J *.2 hours I . hoursDelier$ c$cle time I 6ait time J %hroughput timeI 2+.2 hours J . hours I 3+.1 hours

AACSB: Anal1tic


Bloom's: A**lication

#earning $%&ective: ()6 Com*ute "eliver1 c1cle time- through*ut time- an" manufacturing c1cle efficienc1 +MC0,

#evel: 0as1

11-43


45/86


31. Balanis Corporation "eeps careful trac" of the time re'uired to fill orders. Dataconcerning a particular order appear !elo#

%he throughput time #as(.3/./ hours.33.4 hoursC&14.1 hoursD.*.4 hours

%hroughput time I Process time J nspection time J Moe time J ?ueue timeI 1.4 hours J .4 hours J 3.+ hours J /., hours I 14.1 hours

AACSB: Anal1tic



Bloom's: A**lication#earning $%&ective: ()6 Com*ute "eliver1 c1cle time- through*ut time- an" manufacturing c1cle efficienc1 +MC0,

#evel: 0as1

11-44


46/86


32. oster Corporation "eeps careful trac" of the time re'uired to fill orders. %he timesrecorded for a particular order appear !elo#

%he throughput time #as"&/. hours.1/ hoursC.4.* hoursD.22.* hours

%hroughput time I Process time J nspection time J Moe time J ?ueue timeI 1.2 hours J .4 hours J 2. hours J 4.4 hours I /. hours

AACSB: Anal1tic




#earning $%&ective: ()6 Com*ute "eliver1 c1cle time- through*ut time- an" manufacturing c1cle efficienc1 +MC0,#evel: 0as1

11-4*


47/86


33. otelho Corporation "eeps careful trac" of the time re'uired to fill orders. Dataconcerning a particular order appear !elo#

%he delier$ c$cle time #as"&33.1 hours.3., hoursC.12.+ hoursD.3. hours

%hroughput time I Process time J nspection time J Moe time J ?ueue timeI 1. hours J .3 hours J 3., hours J /. hours I 14./ hoursDelier$ c$cle time I 6ait time J %hroughput timeI 1/.3 hours J 14./ hours I 33.1 hours

AACSB: Anal1tic


AICPA FN: MeasurementBloom's: A**lication


#evel: 0as1

11-4+


48/86


34. :iemiec Corporation "eeps careful trac" of the time re'uired to fill orders. %he timesrecorded for a particular order appear !elo#

%he manufacturing c$cle efficienc$ 7MC8 #as closest to(..2..+C&.12D..+

%hroughput time I Process time J nspection time J Moe time J ?ueue timeI 1.* hours J .2 hours J 2.+ hours J /.* hours I 12./ hours

MC I Kalue-added time 7Process time8 %hroughput 7manufacturing c$cle8 time

I 1.* hours 12./ hours I .12

AACSB: Anal1tic




#evel: 0as1

11-4,


49/86


3*. Mordue Corporation "eeps careful trac" of the time re'uired to fill orders. Dataconcerning a particular order appear !elo#

%he manufacturing c$cle efficienc$ 7MC8 #as closest to(..1*..*3C..*D&.1+

%hroughput time I Process time J nspection time J Moe time J ?ueue timeI 1., hours J .1 hours J 2.4 hours J +., hours I 1. hours


I 1., hours 1. hours I .1+

AACSB: Anal1tic




#evel: 0as1

(ide ndustries is a diision of a ma5or corporation. Data concerning the most recent $earappears !elo#

11-4/


50/86


3+. %he diision0s margin is closest to(.21./=%&*.=C.23.=

D.2/.=

Margin I :et operating income ;ales I


51/86


3/. %he diision0s return on inestment 7RO8 is closest to(.4.1=%&21.,*=C.1,.=

D.1.1=

RO I :et operating income (erage operating assets I


52/86


3. %he margin in Eear 2 #as(.4/=.32=C&2=

D.1=

RO in Eear 1

RO I Margin %urnoer I 1+= 2.* I 4=

$ assumption) the RO is the same in Eear 2 as in Eear 1. %herefore) in Eear 2

RO I Margin %urnoer

4= I Margin 2

Margin I 4= 2 I 2=

AACSB: Anal1ticAICPA BB: Critical Thinking



#evel: 2ar"

4. ;ales in Eear 2 amounted to(.


53/86


41. (erage operating assets in Eear 1 #ere(.


54/86


43. %he diision0s margin is closest to(.3.,=.4,.+=C&,.=

D.1.=

Margin I :et operating income ;ales

I


55/86


4*. %he diision0s return on inestment 7RO8 is closest to"&1.=.1+.+=C.1.+=

D.*.,=

RO I :et operating income (erage operating assets

I


56/86


57/86


4. 6hat #as the Consumer Products Diision0s residual income in March9"&-


58/86


*. Diision (0s sales are(.


59/86


*2. Diision 0s aerage operating assets is(.


60/86


*3. %he aerage operating assets amounted to"&


61/86


**. %he margin used in RO calculations #as closest to(.1/.=%&/.=C.+.+,=

D.1*.=

RO I Margin %urnoer

Margin I RO %urnoer

I 12= 1.* I /=





#evel: 2ar"

%he ail$ Diision recorded operating data as follo#s for the past t#o $ears

ail$ Diision0s turnoer #as eactl$ the same in !oth Eear 1 and Eear 2.

11-+


62/86


*+. ;ales in Eear 1 amounted to(.


63/86


*/. %he margin in Eear 2 #as(.1/.,*=.2,.=C.22.*=

D&12.=

%urnoer in Eear 1 I RO in Eear 1 Margin in Eear 1 I 22.*= 1*= I 1.*

RO I Margin %urnoer

Margin in Eear 2 I RO in Eear 2 %urnoer in Eear 2

I RO in Eear 2 %urnoer in Eear 1

I 1/= 1.* I 12=

AACSB: Anal1tic



Bloom's: A**lication#earning $%&ective: () Com*ute return on investment +R$I, an" sho! ho! changes in sales- e.*enses- an" assets affect R$I

#evel: 2ar"

*. %he aerage operating assets in Eear 2 #ere(.


64/86


%he follo#ing data are aaila!le for the ;outh Diision of Redride Products) nc. and thesingle product it ma"es

+. o# man$ units must ;outh sell each $ear to hae an RO of 1+=9(.24).1)3)C.*2)D&+*)


:et operating income I RO (erage operating assets

I 1+=


65/86


+1. f ;outh #ants a residual income of


66/86


+2. %he aerage operating assets for Eear 2 amounted to(.


67/86


+4. %he minimum re'uired rate of return in Eear 1 #as(.1/=.1,=C&1+=

D.1*=


:et operating income I ;ales Margin

I


68/86


+*. %he diision0s margin is closest to(.2+.4=.1.=C&2.4=

D.24.=


I


69/86


+,. %he diision0s return on inestment 7RO8 is closest to(..2=.41.+=C&1.=

D.1.=


I


70/86


+. %he diision0s margin is closest to(.2+.2=.23.*=C&2.,=

D.11.*=

Margin I :et operating income ;ales I


71/86


,1. %he diision0s return on inestment 7RO8 is closest to(.4.=%&11.*=C..3=

D.2.2=


I


72/86


,3. %he delier$ c$cle time #as(.2.1 hours%&3.+ hoursC./ hours

D.2., hours

%hroughput time I Process time J nspection time J Moe time J ?ueue timeI 1.4 hours J .1 hours J 2., hours J *.3 hours I .* hoursDelier$ c$cle time I 6ait time J %hroughput timeI 21.1 hours J .* hours I 3.+ hours

AACSB: Anal1tic




,4. %he throughput time #as(.4.2 hours%&.* hoursC.3.+ hoursD.2+.4 hours

%hroughput time I Process time J nspection time J Moe time J ?ueue time

I 1.4 hours J .1 hours J 2., hours J *.3 hours I .* hours

AACSB: Anal1tic




#evel: 0as1

11-,1


73/86


,*. %he manufacturing c$cle efficienc$ 7MC8 #as closest to"&.1*..*C..4*

D..1/

%hroughput time I Process time J nspection time J Moe time J ?ueue timeI 1.4 hours J .1 hours J 2., hours J *.3 hours I .* hours


I 1.4 hours .* hours I .1*

AACSB: Anal1tic





art Manufacturing operates an automated steel fa!rication process. &or one operation) arthas found that 4*= of the total throughput 7manufacturing c$cle8 time is spent on non-alue-added actiities. Delier$ c$cle time is 12 hours) #aiting time during the production processis 3 hours) 'ueue time prior to starting the production process is 2 hours) and inspection timeis 1.2 hours.

,+. %he manufacturing c$cle efficienc$ 7MC8 for this operation is"&**=.4*=C.+.+ hoursD.*.4 hours

Percentage of time spent on non-alue-added actiities I 1= - MC4*= I 1= - MCMC I 1= - 4*= I **=

AACSB: Anal1tic




#evel: Me"ium

11-,2


74/86


,,. 6hat is the moe time recorded for the operation9(.1.* hours.+.* hoursC.*./ hours

D&./* hours

Delier$ c$cle time I 6ait time J %hroughput time12 hours I 3 hours J %hroughput time%hroughput time I 12 hours - 3 hours I hoursPercentage of time spent on non-alue-added actiities I 1= - MC4*= I 1= - MCMC I 1= - 4*= I **=


**= I Process time hours

Process time I hours **= I 4.* hours%hroughput time I Process time J nspection time J Moe time J ?ueue time. hours I 4.* hours J 1.2 hours J Moe time J 2. hoursMoe time I . hours - 74.* hours J 1.2 hours J 2. hours8I . hours - /.1* hours I ./* hours





#evel: 2ar"

,/. 6hat is the throughput 7manufacturing c$cle8 time for the operation9(.12. hours%&. hoursC.1. hoursD.*./ hours

Delier$ c$cle time I 6ait time J %hroughput time12 hours I 3 hours J %hroughput time

%hroughput time I 12 hours - 3 hours I hours

AACSB: Anal1tic




#evel: 2ar"

11-,3


75/86


;affer Corporation "eeps careful trac" of the time re'uired to fill orders. Data concerning aparticular order appear !elo#

,. %he throughput time #as"&.3 hours.4. hoursC.3. hoursD.2+ hours

%hroughput time I Process time J nspection time J Moe time J ?ueue timeI 1.+ hours J .2 hours J 3.1 hours J 4.4 hours I .3 hours

AACSB: Anal1tic




#evel: 0as1

/. %he manufacturing c$cle efficienc$ 7MC8 #as closest to"&.1,..*C..43D..1


I 1.+ hours .3 hours I .1,

AACSB: Anal1tic




#evel: 0as1

11-,4


76/86


/1. %he delier$ c$cle time #as(.,.* hours.2.1 hoursC&3. hours

D.3.1 hours

Delier$ c$cle time I 6ait time J %hroughput timeI 21.+ hours J .3 hours I 3. hours





#evel: 0as1

Essay Questions

/2. eae$ &a!rication is a diision of a ma5or corporation. >ast $ear the diision had totalsales of


77/86


/3. Bilde ndustries is a diision of a ma5or corporation. >ast $ear the diision had total salesof


78/86


/*. &inancial data for 6indsor) nc. for last $ear appear !elo#

%he compan$ paid diidends of


79/86


a. Operating assets do not include inestments in other companies or in undeeloped land.

(erage operating assets I 7


80/86


/+. c"els 6ares is a diision of a ma5or corporation. %he follo#ing data are for the latest$ear of operations

Re'uireda. 6hat is the diision0s margin9!. 6hat is the diision0s turnoer9c. 6hat is the diision0s return on inestment 7RO89d. 6hat is the diision0s residual income9

a. Margin I :et operating income ;ales I


81/86


/,. les ndustries is a diision of a ma5or corporation. %he follo#ing data are for the latest$ear of operations

Re'uired6hat is the diision0s residual income9

Residual income I :et operating income - (erage operating assets Minimum re'uired rate

of return

I


82/86


/. Madrazo Corporation uses residual income to ealuate the performance of its diisions.%he minimum re'uired rate of return for performance ealuation purposes is 1=. %he BamesDiision had aerage operating assets of


83/86


. Aaster Corporation0s management "eeps trac" of the time it ta"es to process orders. Duringthe most recent month) the follo#ing aerage times #ere recorded per order

Re'uireda. Compute the throughput time.!. Compute the manufacturing c$cle efficienc$ 7MC8.c. 6hat percentage of the production time is spent in non-alue-added actiities9d. Compute the delier$ c$cle time.

a. %hroughput timeI Process time J nspection time J Moe time J ?ueue timeI 2.+ da$s J .2 da$s J .+ da$s J 3.2 da$s I +.+ da$s

!. MC I Kalue-added time 7Process time8 %hroughput time

I 2.+ da$s +.+ da$s I .3

c. Percentage of time spent on non-alue-added actiitiesI 1= - MC= I 1= - 3= I +1=d. Delier$ c$cle time I 6ait time J %hroughput timeI 1.+ da$s J +.+ da$s I 1,.2 da$s

AACSB: Anal1tic




11-/2


84/86


1. During the most recent month at Coggan Corporation) 'ueue time #as *.3 da$s)inspection time #as .* da$) process time #as 1. da$s) #ait time #as 4.* da$s) and moetime #as .* da$.Re'uired

a. Compute the throughput time.!. Compute the manufacturing c$cle efficienc$ 7MC8.c. 6hat percentage of the production time is spent in non-alue-added actiities9d. Compute the delier$ c$cle time.

a. %hroughput timeI Process time J nspection time J Moe time J ?ueue timeI 1. da$s J .* da$s J .* da$s J *.3 da$s I /.2 da$s

!. MC I Kalue-added time 7Process time8 %hroughput time

I 1. da$s /.2 da$s I .23

c. Percentage of time spent on non-alue-added actiities

I 1= - MC= I 1= - 23= I ,,=d. Delier$ c$cle time I 6ait time J %hroughput timeI 4.* da$s J /.2 da$s I 12., da$s

AACSB: Anal1tic




#evel: Me"ium

11-/3


85/86


2. Dur"ee Corporation "eeps careful trac" of the time re'uired to fill orders. %he timesre'uired for a particular order appear !elo#

Re'uireda. Determine the throughput time. ;ho# $our #or"G!. Determine the manufacturing c$cle efficienc$ 7MC8. ;ho# $our #or"Gc. Determine the delier$ c$cle time. ;ho# $our #or"G

a. %hroughput timeI Process time J nspection time J Moe time J ?ueue timeI . hours J .4 hours J 2.3 hours J 4.* hoursI /.1 hours!. MC I Kalue-added time%hroughput time

I . hours /.1 hours I .11

c. Delier$ c$cle time I 6ait time J %hroughput timeI 1., hours J /.1 hours I 1/./ hours

AACSB: Anal1tic




#evel: 0as1

11-/4


86/86


3. 6altner Corporation0s management reports that its aerage delier$ c$cle time is 2.da$s) its aerage throughput time is ,.* da$s) its manufacturing c$cle efficienc$ 7MC8 is.32) its aerage moe time is .2 da$) and its aerage 'ueue time is 4. da$s.Re'uired

a. 6hat is the #ait time9!. 6hat is the process time9c. 6hat is the inspection time9

a. Delier$ c$cle time I 6ait time J %hroughput time2. da$s I 6ait time J ,.* da$s6ait time I 2. da$s - ,.* da$s I 12.* da$s

!. MC I Process time %hroughput time

.32 I Process time ,.* da$s

Process time I .32 ,.* da$s I 2.4 da$s

c. %hroughput time I Process time J nspection time J Moe time J ?ueue time

,.* da$s I 2.4 da$s J nspection time J .2 da$s J 4. da$snspection time I ,.* da$s - 2.4 da$s - .2 da$s - 4. da$s I . da$s





#evel: 2ar"

Documents

Chapter 11 - Test Bank.doc