1. If improvement in a performance measure on a balanced scorecard should lead to improvement in another performance measure, but does not, then employees must work harder.
True
False

2. The use of return on investment (ROI) as a performance measure may lead managers to reject a project that would be favorable for the company as a whole.
True
False

3. Spar Company has calculated the following ratios for one of its investment centers:

What is Spar's return on investment for this investment center?

• 50.0%
• 12.5%
• 15.0%
• 25.0%

4. Dukelow Corporation has two divisions: the Governmental Products Division and the Export Products Division. The Governmental Products Division's divisional segment margin is $255,000 and the Export Products Division's divisional segment margin is $59,800. The total amount of common fixed expenses not traceable to the individual divisions is $163,700. What is the company's net operating income?

• $314,800
• ($314,800)
• $151,100
• $478,500

5. In November, the Universal Solutions Division of Keaffaber Corporation had average operating assets of $480,000 and net operating income of $46,200. The company uses residual income, with a minimum required rate of return of 11%, to evaluate the performance of its divisions. What was the Universal Solutions Division's residual income in November?

• -$6,600
• $5,082
• $6,600
• -$5,082

6. Sunk costs are costs that have proven to be unproductive.

• True
• False

7. Consistency demands that a cost that is relevant in one decision be regarded as relevant in other decisions as well.

• True
• False

8. An existing asset should not be replaced until its original cost has been fully recovered.

• True
• False

9. Kinsi Corporation manufactures five different products. All five of these products must pass through a stamping machine in its fabrication department. This machine is Kinsi's constrained resource. Kinsi would make the most profit if it produces the product that:

• uses the lowest number of stamping machine hours.
• generates the highest contribution margin per unit.
• generates the highest contribution margin ratio.
• generates the highest contribution margin per stamping machine hour.

10. Winder Corporation is a specialty component manufacturer with idle capacity. Management would like to use its extra capacity to generate additional profits. A potential customer has offered to buy 3,000 units of component QEA. Each unit of QEA requires 5 units of material F85 and 5 units of material E71. Data concerning these two materials follow:

Material F85 is in use in many of the company's products and is routinely replenished. Material E71 is no longer used by the company in any of its normal products and existing stocks would not be replenished once they are used up.

What would be the relevant cost of the materials, in total, for purposes of determining a minimum acceptable price for the order for product QEA?

• $126,702
• $141,750
• $126,295
• $145,965