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50. If both divisions were presented with an opportunity to invest in a project that is estimated to achieve an ROI of 15%, what will the units likely decide?
A. Division P will invest; Division Q will not invest.
B. Division P will invest; Division Q will be indifferent.
C. Division P will not invest; Division Q will invest.
D. Division P will be indifferent; Division Q will not invest.
E. Neither unit will invest in the projects.
Selected data from Chering Division's accounting records revealed the following:
52. Chering Division's return on investment (ROI) is:
A. 6.0%.
B. 8.0%.
C. 14.0%.
D. 15.0%.
E. 20.0%.
53. Chering Division's return on sales (ROS) is:
A. 6.0%.
B. 8.0%.
C. 14.0%.
D. 15.0%.
E. 20.0%.
54. Chering Division's asset turnover (AT) is calculated to be:
A. 1.070.
B. 1.625.
C. 1.875.
D. 4.270.
E. 12.500.
55. Chering Division's residual income (RI) is:
A. $4,400.
B. $8,800.
C. $9,240.
D. $22,380.
E. $49,500.
56. If the minimum rate of return (i.e., cost of capital) was 13%, Chering Division's residual income (RI) would calculate to be:
A. $4,400.
B. $8,800.
C. $9,240.
D. $22,380.
E. $49,500.
57. An investment center's return on investment (ROI) is affected by a change in:
A. Option A
B. Option B
C. Option C
D. Option D
E. Option E
58. The return on investment (ROI) ratio measures:
A. The rate of return on average shareholders' equity.
B. Only earnings as a percent of sales.
C. Both asset turnover (AT) and return on sales (ROS).
D.Asset turnover (AT) and earnings as a percent of sales, correcting for the effects of differing depreciation methods.
E. Operating income less a charge for divisional investment (assets).
59. Return on investment (ROI) is a term often used to express income earned on capital invested in a division (investment center). A division's ROI would increase if:
A. Sales increased by the same dollar amount as expenses and total assets increased.
B.Sales remained the same and expenses were reduced by the same dollar amount that total assets increased.
C. Sales decreased by the same dollar amount that expenses increased.
D. Sales and expenses increased by the same percentage that total assets increased.
E. Net profit margin on sales increased by the same percentage that total assets increased.
60. Residual income (RI) is:
A. Contribution margin of an investment center, less the imputed interest on the invested capital used by the center.
B. Operating income of an investment center divided by average total assets.
C. Another name for Economic Value Added (EVA®)
D. Operating income of an investment center, less the imputed interest on the invested capital used by the center.
E. Operating income of an investment center, plus the imputed interest on the invested capital used by the center.
The following results pertain to an investment center.
61. How much is the residual income (RI) for this investment center?
A. $100,000.
B. $500,000.
C. $600,000.
D. $700,000.
E. $800,000.
62. How much is the return on investment (ROI) for this investment center?
A. 5%.
B. 50%.
C. 60%.
D. 70%.
E. 75%.
63. Residual income (RI) may be a better measure for performance evaluation of an investment center than return on investment (ROI) because:
A. The problems associated with measuring the asset base are eliminated.
B. Desirable investment decisions will not be discouraged by highrateofreturn divisions.
C. Only the gross book value (GBV) of assets needs to be calculated.
D. Returns do not increase as assets are depreciated.
E. The arguments over the appropriate discount rate to use in the calculations are eliminated.
64. Given a competitive outside market for identical intermediate goods, what is the best transfer price, assuming all relevant information is readily available?
A. Average cost of production.
B. Average cost of production, plus average production department allocated profit.
C. Market price of the intermediate goods.
D. Market price of the intermediate goods, less average production department allocated profit.
E. Full cost, plus a markup for profit.
65. Transfer prices based on actual costs of the selling division as opposed to standard costs incurred by that division:
A. Are preferred by the purchasing division.
B. Often fail to provide the selling division with an incentive to control costs.
C. Often encourage the selling division to control costs.
D. Are required by international financial reporting standards.
E. Often encourage the purchasing division to control costs.

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