APM Strategic management accounting and measurement

Divisional profit is $500,000, capital employed is $3,000,000 and the cost of capital is 12 percent. The residual income is:

• 1 $360,000
• 2 $500,000
• 3 $860,000
• 4 $140,000

Divisional profit is $500,000, capital employed is $3,000,000 and the cost of capital is 12 percent. The return on investment of the division is:

• 1 12.0%
• 2 28.0%
• 3 16.7%
• 4 6.0%

Net operating profit after tax is $12m, capital employed is $80m and the cost of capital is 9 percent. Economic value added is:

• 1 $2.4m
• 2 $7.2m
• 3 $12.0m
• 4 $4.8m

A weakness of ROI as a divisional measure is that it can:

• 1 Be calculated only for listed companies
• 2 Ignore the size of the division
• 3 Ignore profit
• 4 Lead managers to reject projects that earn more than the cost of capital but less than the current ROI

The four perspectives of the balanced scorecard are:

• 1 Strategic, tactical, operational, technical
• 2 Financial, customer, internal business process, and innovation and learning
• 3 Revenue, cost, profit, asset
• 4 Plan, do, check, act

The three dimensions of the Building Block model for service businesses are:

• 1 Inputs, outputs and outcomes
• 2 Dimensions, standards and rewards
• 3 Plan, control and review
• 4 Quality, cost and time

Short-termism in performance measurement arises mainly because:

• 1 The budget is too long
• 2 The balanced scorecard is used
• 3 Managers focus on measures that reward immediate results at the cost of long-term value
• 4 Targets are not set