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Exam 15: Performance Evaluation

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Question 81

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Indicate whether each of the following statements is true or false. _____ a) The amount of a sales volume variance is the difference between the static budget and a flexible budget based on actual volume. _____ b) The sales volume variance measures managers' effectiveness in achieving the planned sales price for the company's products. _____ c) Production managers are usually held responsible for the sales volume variance. _____ d) If the planned sales volume was 25,000 units and the actual sales volume was 24,500 units, the sales volume variance was favorable. _____ e) For marketing managers, "making the numbers" refers to reaching the budgeted sales volume.

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a) True
b...

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Question 82

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Based on the information given for a variance, indicate whether the variance is favorable or unfavorable. $\begin{array} { | l | l | l | l | } \hline \text { Item to classify } & \text { Flexible budget } & \text { Actual } & \begin{array} { l } \text { Variance - Favorable or } \\\text { Unfavorable? }\end{array} \\\hline \text { Sales price } & \text { \$4 per unit } & \$ 3.90 \text { per unit } & \\\hline\end{array}$

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Question 83

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How is the amount of a sales volume variance calculated?

Judson Company has an investment in assets of $900,000, income that is 10% of sales, and an ROI of 18%. From this information the amount of income would be

Chatooga Company provided the following selected information about its consumer products division for 2012: $\begin{array}{lc}\text { Desired ROI } & 8 \% \\\text { Net Income } & \$ 140,000 \\\text { Residual Income } & \$ 100,000\end{array}$ Based on this information, the division's investment amount (amount of operating assets) was

Etowah Company reported the following information for 2012: $\begin{array} { l r } \text { Sales } & \$ 600,000 \\\text { Average Operating Assets } & \$ 300,000 \\\text { Margin } & 8 \%\end{array}$ The company's ROI for 2012 was

Unfavorable variances are bad; favorable variances are good.

The China's Best Restaurant chain had a 12% return on a $60,000 investment in new ovens. The investment resulted in increased sales, and the resultant increase in income amounted to 4% of the increase in sales. The amount of the increase in sales must have been

For 2012, the New Products Division of Tellis Company had operating income of $7,000,000 and operating assets of $38,800,000. Tellis has set a target return on investment (ROI) of 14% for each of its divisions. Calculate the return on investment and residual income for New Products in 2012. Did the division meet the target ROI?

A static budget is one that shows estimated revenues and costs at multiple activity levels.