Required: a. Suppose corporate overhead is allocated to the two divisions based on relative revenue. What are the budgeted operating profits in each division for the current year after the corporate costs are allocated? b. At the end of the current year, actual corporate costs incurred were $12.0 million. Of the $12.0 million, $7.4 was fixed. Actual results in the two divisions are as follows: Revenues Direct costs Operating profit before allocation Americas $ 62,100,000 49,680,000 $ 12,420,000 ROW $ 93,150,000 66,137,000 $ 27,013,000 What are the operating profits in each division for the current year after the corporate costs are allocated? Complete this question by entering your answers in the tabs below. Required A Required B Suppose corporate overhead is allocated to the two divisions based on relative revenue. What are the budgeted operating profits in each division for the current year after the corporate costs are allocated? Note: Do not round intermediate calculations. Enter your answers in thousands of dollars. Revenues Direct costs Operating profit before allocations Corporate costs Operating profit Americas ROW Total

Required: a. Suppose corporate overhead is allocated to the two divisions based on relative revenue. What are the budgeted operating profits in each division for the current year after the corporate costs are allocated? b. At the end of the current year, actual corporate costs incurred were $12.0 million. Of the $12.0 million, $7.4 was fixed. Actual results in the two divisions are as follows: Revenues Direct costs Operating profit before allocation Americas $ 62,100,000 49,680,000 $ 12,420,000 ROW $ 93,150,000 66,137,000 $ 27,013,000 What are the operating profits in each division for the current year after the corporate costs are allocated? Complete this question by entering your answers in the tabs below. Required A Required B Suppose corporate overhead is allocated to the two divisions based on relative revenue. What are the budgeted operating profits in each division for the current year after the corporate costs are allocated? Note: Do not round intermediate calculations. Enter your answers in thousands of dollars. Revenues Direct costs Operating profit before allocations Corporate costs Operating profit Americas ROW Total

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 1CE: Forchen, Inc., provided the following information for two of its divisions for last year: Required:...

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Use the following information for Exercises 11-31 and 11-32: Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last years results: Washingtons actual cost of capital was 12%. Exercise 11-32 Residual Income Refer to the information for Washington Company above. In addition, Washington Companys top management has set a minimum acceptable rate of return equal to 8%. Required: 1. Calculate the residual income for the Adams Division. 2. Calculate the residual income for the Jefferson Division.
Service department charges In divisional income statements prepared for Demopolis Company, the Payroll Department costs are charged back to user divisions on the basis of the number of payroll distributions, and the Purchasing Department costs are charged back on the basis of the number of purchase requisitions. The Payroll Department had expenses of 64,560, and the Purchasing Department had expenses of 40,000 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: A. Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division. B. Using the cost driver information in (A), determine the annual amount of payroll and purchasing costs allocated to the Residential, Commercial, and Government Contract divisions from payroll and purchasing services. C. Why does the Residential Division have a larger support department allocation than the other two divisions, even though its sales are lower?
Rocky Mountain Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared: The support department allocation rates for the support department costs were based on revenues. Because the revenues of the two divisions were the same, the support department allocations to each division were also the same. The following additional information is available: a.Does the operating income (loss) for the two divisions accurately measure performance? Explain. b.Correct the divisional income statements, using appropriate support department cost drivers.
Divisional performance analysis and evaluation The vice president of operations of Free Ride Bike Company is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed income statement data for the past year for each division are as follows: Instructions 1. Prepare condensed divisional income statements for the year ended December 31, 20Y7, assuming that there were no support department allocations. 2. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment for each division. Round percentages and the investment turnover to one decimal place. 3. If managements minimum acceptable return on investment is 10%, determine the residual income for each division. 4. Discuss the evaluation of the two divisions, using the performance measures determined in parts (1), (2), and (3).
At the beginning of the period, the Fabricating Department budgeted direct labor of 72,000 and equipment depreciation of 18,500 for 2,400 hours of production. The department actually completed 2,350 hours of production. Determine the budget for the department, assuming that it uses flexible budgeting.
Forchen, Inc., provided the following information for two of its divisions for last year: Required: 1. For the Small Appliances Division, calculate: a. Average operating assets b. Margin c. Turnover d. Return on investment (ROI) 2. For the Cleaning Products Division, calculate: a. Average operating assets b. Margin c. Turnover d. Return on investment (ROI) 3. What if operating income for the Small Appliances Division was 2,000,000? How would that affect average operating assets? Margin? Turnover? ROI? Calculate any changed ratios (round to four significant digits).
Classify each of the following actions as either being associated with the financial accounting information system (FS) or the cost management information system (CMS): a. Determining the total compensation of the CEO of a public company b. Issuing a quarterly earnings report c. Determining the unit product cost using TDABC d. Calculating the number of units that must be sold to break even e. Preparing a required report for the SEC f. Preparing a sales budget g. Using cost and revenue information to decide whether to keep, or drop, a product line h. Preparing an annual statement of financial position that conforms to generally accepted accounting principles (GAAP) i. Using cost and revenue information to decide whether to invest in a new production system or not j. Reducing costs by improving the overall quality of a product k. Using a debt-equity ratio and liquidity ratios from a balance sheet to assess the likelihood of bankruptcy l. Using a public companys financial statements to decide whether or not to buy its stock
Refer to the data in Exercise 7.22. The support departments are ranked in order of highest cost to lowest cost. Required: 1. Allocate the costs of the support departments using the sequential method. (Round allocation ratios to four significant digits. Round allocated costs to the nearest dollar.) 2. Using direct labor hours, compute departmental overhead rates. (Round to the nearest cent.)
The following selected data pertain to the Argent Division for last year: Required: 1. How much is the residual income? 2. How much is the return on investment? (Rounded to four significant digits.)