Problem 1: ABC Corporation has sales of $1,000,000, gross profit of $550,000, net income of $150,000, average total operating assets of $1,500,000 and fixed assets of $450,000. What is ABC's return on investment (ROI)?
Problem 2: Holding all other factors equal, if net income increases, what will be the effect on return on investment (ROI)?
- It will increase proportionately.
- It will decrease proportionately.
- It will remain the same.
- ROI will increase at twice the rate of the increase in net income.
Problem 3: Holding all other factors equal, if average total operating assets are increased, what will be the effect on return on investment (ROI)?
- It will increase proportionately.
- It will decrease proportionately.
- It will remain the same.
- ROI will increase at twice the rate of the increase in average total assets.
Problem 4: Holding all other factors equal, if asset turnover is increased from 0.8 to 0.9, what will be the effect on return on investment (ROI)?
- It will increase proportionately.
- It will decrease proportionately.
- It will remain the same.
- ROI will increase by 10%.
Problem 5: The "Balanced Scorecard" approach summarizes performance criteria into four categories. Which of the following is NOT one of the criteria?
- Customer satisfaction
- Current market price of the company's common stock
- Internal business
- Innovation and learning
Problem 6: Fully absorbed transfer pricing would be based on which of the following?
- Both fixed and variable costs of production
- Fixed portion of production costs only
- Variable portion of production costs only
- None of the above
Problem 7: When should opportunity cost be used in determining transfer pricing?
- Only when no idle capacity exists.
- Only when idle capacity exists.
- At all times.
- Opportunity cost should not be used in determining transfer pricing at any time.