1. Calculate the ROI and residual income for each division of Cora Manufacturing, and briefly explain which manager will get the bonus. What are the advantages and disadvantages of each measure? 2. The CEO of Cora Manufacturing has recently heard of another measure similar to residual income called EVA. The CEO has the accountant calculate adjusted incomes for clothing and cosmetics and finds that the adjusted after-tax operating incomes are $634,200 and $2,181,600, respectively. Also, the clothing division has $470,000 of current liabilities, while the cosmetics division has only $380,000 of Required current liabilities. Using the preceding information, calculate the EVA for each division and discuss which manager will get the bonus. 3. What nonfinancial measures could Cora use to evaluate divisional performances?
1. Calculate the ROI and residual income for each division of Cora Manufacturing, and briefly explain which manager will get the bonus. What are the advantages and disadvantages of each measure? 2. The CEO of Cora Manufacturing has recently heard of another measure similar to residual income called EVA. The CEO has the accountant calculate adjusted incomes for clothing and cosmetics and finds that the adjusted after-tax operating incomes are $634,200 and $2,181,600, respectively. Also, the clothing division has $470,000 of current liabilities, while the cosmetics division has only $380,000 of Required current liabilities. Using the preceding information, calculate the EVA for each division and discuss which manager will get the bonus. 3. What nonfinancial measures could Cora use to evaluate divisional performances?
Chapter9: Responsibility Accounting And Decentralization
Section: Chapter Questions
Problem 8EA: Using the information in the previous exercises about Marleys Manufacturing, determine the operating...
Related questions
Question
ROI, RI, EVA, and performance evaluation. Cora Manufacturing makes fashion products and competes on the basis of quality and leading-edge designs. The company has two divisions, clothing and cosmetics. Cora has $5,000,000 invested in assets in its clothing division. After-tax operating income from sales of clothing this year is $1,000,000. The cosmetics division has $12,500,000 invested in assets and an after-tax operating income this year of $2,000,000. The weightedaverage cost of capital for Cora is 6%. The CEO of Cora has told the manager of each division that the division that “performs best” this year will get a bonus.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 6 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Essentials Of Business Analytics
Statistics
ISBN:
9781285187273
Author:
Camm, Jeff.
Publisher:
Cengage Learning,