Select the best answer from the five listed below to fill in the blank The residual income approach to measuring divisional performance measurement is closely related to the _method of performance measurement. a. economic value added O b. internal rate of return O c. accounting rate of return O d. return on capital employed O e. payback period

Select the best answer from the five listed below to fill in the blank The residual income approach to measuring divisional performance measurement is closely related to the _method of performance measurement. a. economic value added O b. internal rate of return O c. accounting rate of return O d. return on capital employed O e. payback period

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter9: Responsibility Accounting And Decentralization

Section: Chapter Questions

Problem 20Q: Explain the benefits of a residual income structure within an investment center framework. It may...

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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
Select the best answer from the five listed below to fill in the blank The residual income approach to measuring divisional performance measurement is closely related to the method of performance measurement. O a. payback period O b. economic value added O c. return on capital employed O d. internal rate of return O e. accounting rate of return
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) 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 Income
The systematic examination of the relationships among selling prices, volume of sales and production, costs, and profits is termed a. cost-volume-profit analysis b. contribution margin analysis c. budgetary analysis d. gross profit analysis In a profit center, the manager has responsibility and authority for making decisions that affect a. assets b. investments c. long-term liabilities d. costs
Which method results in a more realistic amount for income because it matches the most current costs against revenue? a.FIFO b.Weighted average cost c.Specific identification d.LIFO
A-1. Evaluate the performance of the two divisions assuming BMI uses residual income. A-2. Which division had the better performance?
Exercise 10-12 Evaluating New Investments Using Return on Investment (ROI) and Residual Income (LO10-1, LO10-2] Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A $ 6,300,000 $ 1,260,000 340,200 Division B $ 10,300,000 $ 5,150,000 968,200 18.80% Division C $ 9,400,000 $ 1,880,000 24 Sales Average operating assets Net operating income Minimum required rate of return 2$ 249,100 20.00% 17.00% Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 20% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept or…
On a cost-volume-profit graph, when the Total Cost line is higher than the Total Revenue line, the difference represents Select one: O A. a positive return on the investment O B. a net loss O C. net income O D. not enough information is presented
Compute the ROI ratio (operating income to total assets) of each division using historical-cost measures. Comment on the results.
For external-reporting purposes, GAAP require that net income be based on _______ costing method. a. absorption b. variable c. direct d. semi-variable e. activity based
Residual income is: A. The excess of operating income over the minimum operating income required B. The same as operating income C. The excess of the minimum operating income required over operating income on the income statement D. Operating income multiplied by the desired ROI