Question: 1
A company operates a divisional structure. The manager of division D receives a bonus based on the division's annual return on capital employed (ROCE).
A minimum ROCE of 20% must be achieved to receive any bonus and thereafter the bonus increases in line with increases in ROCE.
This year division D achieved a ROCE of 24% and the divisional manager received a large bonus.
The manager is considering an investment in a new machine for next year. The incremental ROCE earned by the machine is expected to be 19% although the ROCE for the division as a whole with the machine is expected to be 22%. Without the machine, ROCE is likely to be stable at 24%.
The cost of capital for the company as a whole is 18% per year.
Which of the following statements is correct?
Question: 2
An organization's transfer pricing system involves:
* The transferring division receiving $20 per unit; an amount equal to its variable costs.
* The receiving division paying an additional $30,000 every month to the transferring division.
Which transfer pricing system is the organization using?
Question: 3
An organization is competing in the high technology market. It sets a high sales price for its products initially to target the early adopters, and then the price is gradually reduced.
This pricing strategy is known as:
Question: 4
Which THREE of the following are advantages of changing from a 'top-down' to a 'bottom-up' (participative) style of budgeting?
Question: 5
For a pharmaceutical manufacturer, in which perspective of the Balanced Scorecard should the performance measure 'number of patents granted during the year' be included?
