Managerial Accounting Chapter 11

Managers can improve ROI by improving either ____________________ or ______________________.

margin; turnover

Operating assets include: a. accounts receivable b. inventory c. equipment d. investment in bonds e. land held for investments

a. accounts receivable b. inventory c. equipment

An organization in which decision-making authority is spread throughout the organization is a. decentralized b. centralized

a. decentralized

ROI is a method used to evaluate: a. investment centers, but not cost or profit centers b. cost, profit, and investment centers c. profit and investment centers, but not cost centers d. cost and profit centers, but not investment centers

a. investment centers, but not cost or profit centers

EBIT is another term for: a. operating assets b. net operating income c. income after taxes d. residual income

b. net operating income

Net operating income/ average operating assets = a. turnover b. margin c. return on investment d. residual income

c. return on investment

Macey Inc.' investment center had average operating assets of $350,000, revenues of $1,050,000, and net operating income of $70,000. What is their return on investment? a. 5% b. 10% c. 6.7% d. 20%

d. 20%

The manager of a(n) ___________________ center has control over costs, revenues, and investments in operating assets.

investment

Comparing actual net income to budgeted net income is often done to evaluate the manager of a(n) ______________ center.

profit

ROI can be calculated as: a. net operating income divided by average operating assets b. margin divided by turnover c. margin multiplied by turnover d. average operating assets divided by net operating income

a. net operating income divided by average operating assets c. margin multiplied by turnover

Valid criticisms of evaluating performance based on ROI include managers may: a. reject investment opportunities that are profitable for the company but have a negative impact on a mangers ROI b. take actions that increase ROI in the short-run at the expense of long-term performance c. affect ROI by increasing sales or decreasing operating expenses for their division d. be put in charge of a business segment that includes committed costs over which a manager has no control

a. reject investment opportunities that are profitable for the company but have a negative impact on a mangers ROI b. take actions that increase ROI in the short-run at the expense of long-term performance d. be put in charge of a business segment that includes committed costs over which a manager has no control

Using net book value (instead of gross cost) to calculate average operating assets: a. decreases ROI over time b. increases ROI over time c. has no effect on ROI d. encourages new investment

b. increases ROI over time

The net operating income that an investment center earns above the minimum required return on its average operating assets is: a. return on investment (ROI) b. residual income c. net income

b. residual income

Managers of cost centers are evaluated on: a. revenues and costs incurred in their responsibility center b. their ability to control costs in their responsibility center c. revenues, costs, and their use of investments in their responsibility center

b. their ability to control costs in their responsibility center

When a manager is evaluated on residual income, an investment is acceptable when: a. net operating income for the new investment is above the current return on average operating assets b. the return on investment of the new project equals or exceeds current ROI c. it generates any positive net operating income d. net operating income for the investment is above the minimum required return on average operating assets

d. net operating income for the investment is above the minimum required return on average operating assets