PM E Performance measurement and control

A division earns profit of $180,000 on capital employed of $1,000,000. What is the ROI?

• 1 1.8%
• 2 18%
• 3 5.6%
• 4 12%

A division earns profit of $180,000 on capital employed of $1,000,000 and the required return is 12 percent. What is the residual income?

• 1 $180,000
• 2 $300,000
• 3 $60,000
• 4 $120,000

Why might ROI discourage a manager from investing in a project?

• 1 The project's return may be above the cost of capital but below the division's current ROI
• 2 ROI ignores profit
• 3 It rewards high capital employed
• 4 It is not a percentage

A division has spare capacity. The marginal cost of an item is $14 and it sells outside for $22. What is the minimum transfer price?

• 1 $22
• 2 $14
• 3 $36
• 4 $8

Which is the best basis for a transfer price when there is a competitive external market?

• 1 Zero
• 2 Full cost plus 50 percent
• 3 The market price
• 4 The buyer's choice

What is goal congruence?

• 1 Managers' actions are aligned with the goals of the whole organisation
• 2 All managers have the same pay
• 3 All divisions have the same profit
• 4 The budget is always met

Which three Es form the basis of value for money?

• 1 Economy, efficiency and effectiveness
• 2 Earnings, equity and expansion
• 3 Efficiency, evaluation and expenditure
• 4 Economy, equity and ethics

Which of these is an additional issue in transfer pricing for a multinational group?

• 1 All countries have identical rules
• 2 There are no tax authorities
• 3 Only one currency is used
• 4 Differences in tax rates and exchange controls between countries

Which perspective of the balanced scorecard includes learning and innovation measures?

• 1 Financial
• 2 Innovation and learning
• 3 Customer
• 4 Internal business process

Which is a problem in measuring performance in a public sector organisation?

• 1 Objectives are many and may conflict, and outputs are hard to measure
• 2 There are no stakeholders
• 3 Costs are never important
• 4 Profit is easy to measure