Chapter 24: Q9RQ (page 1355)
What is a performance evaluation system?
A performance evaluation system is systematic performance evaluation of an employees’ job.
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Decentralization divides company operations into various reporting units. Most decentralized subunits can be described as one of four different types of responsibility centers.
Requirements
1. Explain why companies decentralize. Describe some typical methods of decentralization.
2. List the four most common types of responsibility centers, and describe their responsibilities.
Question:Each of the following managers works for a national chain of hotels and has been given certain decision-making authority. Classify each of the managers according to the type of responsibility center he or she probably manages.
a. Manager of the Central Reservation Office
b. Managers of various corporate-owned hotel locations
c. Managers of the Northeast and Southeast Corporate Divisions
d. Manager of the Housekeeping Department at one hotel
e. Manager of the complimentary breakfast buffet at one hotel
List the advantages of decentralization.
Classify each key performance indicator according to the balancedscorecard perspective it addresses. Choose from the following: financialperspective, customer perspective, internal business perspective, or learning andgrowth perspective.
9. Number of repeat customers
10. Employee turnover
11. Revenue growth
12. Number of on-time deliveries
13. Number of defects found during the manufacturing process
Zims, a national manufacturer of lawn-mowing and snow-blowing equipment, segments its business according to customer type: professional and residential. The following divisional information was available for the past year:
Net Sales Revenue Operating Income Average Total Assets
Residential \( 550,000 \) 65,280 $ 192,000
Professional 1,090,000 164,820 402,000
Management has a 26% target rate of return for each division.
Requirements
1. Calculate each division’s ROI. Round all of your answers to four decimal places.
2. Calculate each division’s profit margin ratio. Interpret your results.
3. Calculate each division’s asset turnover ratio. Interpret your results.
4. Use the expanded ROI formula to confirm your results from Requirement 1. What can you conclude?
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