Unit VIII Lab Assignment

1. Firms that grant substantial decision-making authority to the managers of subunits are referred to as

residual organizations.

profit centers.

responsibility organizations.

decentralized organizations.

1. For what does responsibility accounting hold managers responsible?

All costs charged to a manager's subunit

All costs charged to a manager's subunit plus a share of company-wide fixed costs

Only the costs that a manager can control

Only the costs that a manager have personally approved

1. A subunit that has responsibility for controlling costs, but does not have responsibility for generating revenue is a(n)

investment center.

cost center.

profit center.

value added center.

1. Which of the following is a characteristic of a profit center?

The center's manager has control over revenues and costs.

The subunit has responsibility for generating revenues, controlling costs, and generating a return on assets.

The subunit can be evaluated using residual income.

The subunit can be evaluated by comparing it to other investment centers.

1. A manager who has the ability to replace assets within his division, is in control of what type of center?

Business center

Profit center

Cost center

Investment center

1. CinrichMills is a division of Iowa Woolen Products. For the most recent year,Cinrichhad net income of $22,800,000. Included in income was interest expense of $1,456,000. The operation's tax rate is25percent. Total assets ofCinrichMills are $244,400,000, current liabilities are $54,080,000, and $37,440,000of the current liabilities are noninterest bearing. Calculate NOPAT, invested capital, and ROI forCinrichMills.(Round ROI to 2 decimal places, e.g. 5.25%.)

NOPAT		$enter NOPAT in dollars rounded to 0 decimal places
Invested capital		$enter Invested capital in dollars rounded to 0 decimal places
ROI		enter the return on investment in dollars rounded to 2 decimal places %

1. PaverHospital is a division of Superior Healthcare that is organized as an investment center. In the past year, the hospital reported an after-tax income of $3,080,000. Total interest expense was $1,452,000, and the hospital's tax rate was20percent. Hospital assets totaled $30,800,000, and noninterest-bearing current liabilities were $10,032,000. Superior has established a required rate of return equal to18percent of invested capital. Calculate the residual income/EVA ofPaverHospital.(Enter negative answers preceding either - sign, e.g. -45 or in parentheses, e.g. (45).)

Residual income/EVA

$enter Residual income/EVA in dollars