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Exam 15: Performance Evaluation

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Question 81

True/False

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Unfavorable variances are bad; favorable variances are good.

A) True
B) False

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Question 82

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How is the amount of a sales volume variance calculated?

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The amount of a sales volume variance is...

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Question 83

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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

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

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.

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

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?

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

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