Accounting Ch 11

Lakukan tugas rumah & ujian kamu dengan baik sekarang menggunakan Quizwiz!

1) Manager may take actions that increase ROI in the short run but harm the company In the long run (e.g., cut R&D expenses). 2) Managers evaluated on ROI may reject profitable investment opportunities that are profitable for the whole company but would have a negative impact on the manager's performance evaluation (show in the next section).

2 Criticisms of ROI

B

A TQM team at Narton Corp has recorded the following average times for production: Wait 3.0 days Move 0.5 days Inspection 0.4 days Queue 9.3 days Process 0.2 days What is the Manufacturing Cycle Efficiency (MCE)? A) 50.0%. B) 1.9%. C) 52.0%. D) 5.1%.

C

A TQM team at Narton Corp has recorded the following average times for production: Wait 3.0 days Move 0.5 days Inspection 0.4 days Queue 9.3 days Process 0.2 days What is the delivery cycle time (DCT)? A) 0.5 days. B) 0.7 days. C) 13.4 days. D) 10.4 days.

A

A reason that a firm might choose to maintain centralized decision-making instead of decentralizing would be: A) lower level mangers may have objectives that conflict with the objectives of the entire organization. B) the increased cost necessary to support expert knowledge in a centralized environment. C) the training that is provided to lower management by decentralized operations. D) the superior customer relations which typically result from centralized operations.

no

Are most firms are neither totally centralized nor totally decentralized

1) Lower-level decisions often based on better information. 2) Lower-level managers gain experience in decision-making. 3) Top management freed to concentrate on strategy. 4) Lower level managers can respond quickly to customers. 5) Decision-making authority leads to job satisfaction.

Benefits of Decentralization (5)

1) Lower-level managers may make decisions without seeing the "big picture." 2) May be a lack of coordination among autonomous managers. 3) Lower-level manager's objectives may not be those of the organization. 4) May be difficult to spread innovative ideas in the organization.

Disadvantages of Decentralization

an asset's net book value decrease over time, leading to ROI mechanically increase over time. Replacing old equipment increases the book value and decreases ROI. An alternative is to use gross cost of the asset, which ignores accumulated depreciation.

Drawback of using netbook value

1) They are "backward looking" and short-term focused (lag indicators) 2) They include only quantitative measures and no qualitative measures

General criticism over RI & ROI (2)

acquisition cost - accumulated depreciation

How to calculate netbook value

Value-added time/Manufacturing Cycle Time

Manufacturing Cycle Efficiency formula

net operating income/sales

Margin formula

net book

Most companies use the ___ ___ value of depreciable assets to calculate average operating assets. This is consistent with their financial reporting practice.

Process Time + Inspection Time + Move Time + Queue Time

Name all 4 Manufacturing Cycle/Throughput times

B

Redmond Awnings, a division of Wrap-up Corp., has a net operating income of $60,000 and average operating assets of $300,000. If the manager of the division is evaluated based on ROI, will she want to make an investment of $100,000 that would generate additional net operating income of $18,000 per year? A) yes B) no

A

Redmond Awnings, a division of Wrap-up Corp., has a net operating income of $60,000 and average operating assets of $300,000. The required rate of return for the company is 15%. If the manager of the Redmond Awnings division is evaluated based on residual income, will she want to make an investment of $100,000 that would generate additional net operating income of $18,000 per year?

D

Redmond Awnings, a division of Wrap-up Corp., has a net operating income of $60,000 and average operating assets of $300,000. The required rate of return for the company is 15%. What is the division's ROI? A) 25% B) 5% C) 5% D) 20%

C

Redmond Awnings, a division of Wrap-up Corp., has a net operating income of $60,000 and average operating assets of $300,000. The required rate of return for the company is 15%. What is the division's residual income? A) $240,000 B) $ 45,000 C) $ 15,000 D) $ 51,000

Net income - (avg operating assets x minimum required rate of return)

Residual Income formula

A

Residual income = $5,000 Minimum required return: $15,730 Average operating assets = $143,000 Sales = $670,000 Find Return on Investment (ROI). A) 14% B) 16% C) 17% D) 19%

1) net income/avg operating income 2) turnover*margin

Return on Investment (ROI) Formulas

process time

The only value added time is

Wait Time

Time between order being received and production being started

Process Time, Inspection Time, Move Time, Queue Time

Time between production starting and goods being shipped (4)

sales/avg operating assets

Turnover formula

degree

Typically, decentralization is a matter of ____

Exclude: land held for future use, investment in another company, building rented for someone else.

What is excluded from average operating assets

Cash, accounts receivable, inventory, plant and equipment, and other productive assets.

What is included in average operating assets

Througput

What is the time between production starting and goods being shipped called

It cannot be used to compare the performance of divisions of different sizes.

major disadvantage of the residual income approach

decentralized

organization that grants substantial decision making authority to the managers of subunits

Return on Investment (ROI), Residual Income (RI)

what are the two performance measures


Set pelajaran terkait

MGT 247 FINAL EXAM practice questions

View Set

Abnormal Psychology: Chapter One

View Set

Criminal Justice 100 - Exam one book questions

View Set

Discuss the four key functions of management.

View Set

ASTRONOMY 1010 Questions from Quizzes

View Set