(Points: 10)

Consider the following statements about goal congruence:

I. Goal congruence is obtained when managers of subunits throughout an organization strive to
achieve the goals set by top management.
II. Managers are often more concerned about the performance of their own subunits rather than
the performance of the entire organization.
III. Achieving goal congruence in most organizations is relatively straightforward and easy to
accomplish.
Which of the above statements is (are) true?

1. I only

2. II only.

3. I and II.

4. II and III.

5. I, II, and III.

false

Save Answer
2.
(Points: 10) Which of the following performance measures is (are) used to evaluate the
financial success or failure of investment centers?

1. Residual income.

2. Return on investment.

3. Number of suppliers.

4. Economic value added.

5. All of the above measures are used except "C".

false

Save Answer
3.
(Points: 10) Symington's Western Division is currently purchasing a part from an outside
supplier for $26 per unit. The company's Eastern Division, which has no excess capacity, makes
and sells this part for external customers at a variable cost of $19 and a selling price of $29. If
Eastern begins sales to Western, it (1) will use the general transfer-pricing rule and (2) will be
able to reduce variable cost on internal transfers by $2. On the basis of this information, Eastern
should establish a transfer price of:

1. $17.

2. $19.

3. $27.

4. $29.

5. some other amount.

false

Save Answer
4.
(Points: 10) Gail is contemplating a job offer with an advertising agency where she will make
$50,000 in her first year of employment. Alternatively, Gail can begin to work in her father's
business where she will earn an annual salary of $40,000. If Gail decides to work with her father,
the opportunity cost would be:

1. $0.

2. $40,000.

3. $50,000.

4. $90,000.

5. irrelevant in deciding which job offer to accept.

false

Save Answer
5.
(Points: 10) Which of the following costs can be ignored when making a decision?
 1. Opportunity costs.

2. Differential costs.

3. Sunk costs.

4. Relevant costs.

5. All future costs.

false

Save Answer
6.
(Points: 10)
Copper Top, which has excess capacity, received a special order for 3,000 units at a price of $14
per unit. Currently, production and sales are budgeted for 10,000 units without considering the
special order. Budget information for the current year follows.
Sales $170,000
Less: Cost of goods sold 130,000
Gross margin $ 40,000
Cost of goods sold includes $30,000 of fixed manufacturing cost. If the special order is accepted,
the company's income will:

1. increase by $3,000.

2. increase by $12,000.

3. decrease by $3,000.

4. decrease by $12,000.

5. change by some other amount.

false

Save Answer
7.
(Points: 10)
The Shoe Department at the Baton Rouge Department Store is being considered for closure. The
following information relates to shoe activity:
Sales revenue $350,000
Variable costs:
Cost of goods sold 280,000
Sales commissions 30,000
Fixed operating costs 90,000
If 70% of the fixed operating costs are avoidable, should the Shoe Department be closed?

1. Yes, Baton Rouge would be better off by $23,000.

2. Yes, Baton Rouge would be better off by $50,000.

3. No, Baton Rouge would be worse off by $13,000.

4. No, Baton Rouge would be worse off by $40,000.

5. None of the above.

false

Save Answer
8.
(Points: 10) ROI is most appropriately used to evaluate the performance of:

1. cost center managers.

2. revenue center managers.

3. profit center managers.

4. investment center managers.

5. both profit center managers and investment center managers.

false

Save Answer
9.
(Points: 10) Webster Company had sales revenue and operating expenses of $5,000,000 and
$4,200,000, respectively, for the year just ended. If invested capital amounted to $6,000,000, the
firm's ROI was:

1. 13.33%.

2. 83.33%.

3. 120.00%.

4. 750.00%.

5. some other figure.

false

Save Answer
10.
(Points: 10) Applebaum Enterprises had a sales margin of 8%, sales of $3,000,000, and
invested capital of $2,000,000. The company's ROI was:

1. 5.33%.

2. 7.00%.

3. 12.00%.

4. 20.00%.

5. some other figure.

false

Save Answer
11.
(Points: 10) Mission, Inc., reported a return on investment of 12%, a capital turnover of 5, and
income of $180,000. On the basis of this information, the company's invested capital was:

1. $300,000.

2. $900,000.
 3. $1,500,000.

4. $7,500,000.

5. some other amount.

false

Save Answer
12.
(Points: 10) A division's return on investment may be improved by increasing:

1. cost of goods sold and expenses.

2. sales margin and cost of capital.

3. sales revenue and cost of capital.

4. capital turnover or sales margin.

5. capital turnover or cost of capital.

false

Save Answer
13.
(Points: 10) Which of the following is used in the calculation of both return on investment and
residual income?

1. Total stockholders' equity.

2. Retained earnings.

3. Invested capital.

4. Total liabilities.

5. The cost of capital.

false

Save Answer
14.
(Points: 10)
The following information relates to the Atlantic Division of Ocean Enterprises:
Interest rate on debt capital: 8%
Cost of equity capital: 12%
Market value of debt capital: $50 million
Market value of equity capital: $80 million
Income tax rate: 30%
On the basis of this information, Atlantic's weighted-average cost of capital is:

1. 7.3%.

2. 8.3%.

3. 9.5%.

4. 10.8%.

5. some other figure.

false

Save Answer
15.
(Points: 10) Utah Corporation has an after-tax operating income of $2,600,000 and a 10%
weighted-average cost of capital. Assets total $8,000,000 and current liabilities total $400,000.
On the basis of this information, Utah's economic value added is:

1. $1,400,000.

2. $1,800,000.

3. $1,840,000.

4. $1,980,000.
 5. some other amount.
false

Save Answer