Question

In: Accounting

A positive evaluation of a manager would include Residual Income of zero and an ROI greater...

A positive evaluation of a manager would include Residual Income of zero and an ROI greater than the minimum requirement

1)

True.

2)

False.

Question 4

Residual income of $10,000 indicates the manager is earning above the minimum requirement but residual income of zero ($0) indicates the manager is earning below the minimum requirement.

1)

True.

2)

False.

Residual income should not be used to evaluate a profit center.

1)

True.

2)

False.

The World Peace Co. has three divisions: the Fox Division, the Tiger Division and the Panther Division. The following was reported at year end for each division. The company’s minimum requirement is 10%:

Fox Division Tiger Division Panther Division
Income from Operations (Net Income from Operations) $300,000 $100,000 $200,000
Average Operating Assets (Invested Assets) $5,000,000 $1,000,000 $1,500,000



The Return on Investment (ROI) for the Fox Division is closest to options:

1)

7.0%

2)

6.0%

3)

60.0%

4)

None of the above

The World Peace Co. has three divisions: the Fox Division, the Tiger Division and the Panther Division. The following was reported at year end for each division. The company’s minimum requirement is 10%:

Fox Division Tiger Division Panther Division
Income from Operations (Net Income from Operations) $300,000 $100,000 $200,000
Average Operating Assets (Invested Assets) $5,000,000 $1,000,000 $1,500,000



Residual Income for the Tiger Division is closest to options:

1)

$10,000

2)

$0

3)

10%

4)

$100,00

The World Peace Co. has three divisions: the Fox Division, the Tiger Division and the Panther Division. The following was reported at year end for each division. The company’s minimum requirement is 10%:

Fox Division Tiger Division Panther Division
Income from Operations (Net Income from Operations) $300,000 $100,000 $200,000
Average Operating Assets (Invested Assets) $5,000,000 $1,000,000 $1,500,000



Which manager is performing the best based on ROI?

1)

Panther Division

2)

Tiger Division

3)

Fox Division

4)

Unable to determine.

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