Selected sales and operating data for three divisions of different structural engineering firms are given asfollows:Division A Division B Division CSales ........................................................... $12,000,000 $14,000,000 $25,000,000Average operating assets ............................ $3,000,000 $7,000,000 $5,000,000Net operating income .................................. $600,000 $560,000 $800,000Minimum required rate of return .................. 14% 10% 16%Required:1. Compute the return on investment (ROI) for each division using the formula stated in terms of marginand turnover.2. Compute the residual income for each division.

Selected sales and operating data for three divisions of different structural engineering firms are given asfollows:Division A Division B Division CSales ........................................................... $12,000,000 $14,000,000 $25,000,000Average operating assets ............................ $3,000,000 $7,000,000 $5,000,000Net operating income .................................. $600,000 $560,000 $800,000Minimum required rate of return .................. 14% 10% 16%Required:1. Compute the return on investment (ROI) for each division using the formula stated in terms of marginand turnover.2. Compute the residual income for each division.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 5E: Service department charges In divisional income statements prepared for Demopolis Company, the...

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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?
(J) Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division ADivision BDivision CSales$ 12,120,000$ 28,120,000$ 20,120,000Average operating assets$ 3,030,000$ 7,030,000$ 5,030,000Net operating income$ 496,920$ 449,920$ 503,000Minimum required rate of return7.00%7.50%10.00%Required: 1. Compute the margin, turnover, and return on investment (ROI) for each division. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 8% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept the opportunity
Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A Division B Division C Sales $ 15,400,000 $ 28,320,000 $ 25,400,000 Average operating assets $ 3,080,000 $ 7,080,000 $ 5,080,000 Net operating income $ 693,000 $ 396,480 $ 736,600 Minimum required rate of return 7.00 % 7.50 % 14.50 % Required: 1. Compute the margin, turnover, and return on investment (ROI) for each division. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 8% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept the opportunity?
The sales, operating income, and invested assets for each division of Salem Company are as follows: Sales OperatingIncome InvestedAssets Division C $4,000,000 $410,000 $3,500,000 Division D 3,500,000 600,000 4,000,000 Division E 2,250,000 780,000 7,000,000 Management has established a minimum rate of return for invested assets of 11%. a. Determine the residual income for each division. Residual Income Division C $fill in the blank 1 Division D $fill in the blank 2 Division E $fill in the blank 3 b. Based on residual income, which division is the most profitable?
Delisa Corporation has two divisions: Division L and Division Q. Data from the most recent month appear below: Total Company Division L Division QSales $ 517,000 $ 156,000 $ 361,000 Variable expenses 255,960 82,680 173,280 Contribution margin 261,040 73,320 187,720 Traceable fixed expenses 171,000 49,000 122,000 Segment margin 90,040 $ 24,320 $ 65,720 Common fixed expenses 87,890 Net operating income $ 2,150 The break-even in sales dollars for Division Q is closest to:
Divisional Income Statements The following data were summarized from the accounting records for South Seas Coast Construction Company for the year ended June 30, 20Y8: Cost of goods sold: Service department charges: Commercial Division $551,130 Commercial Division $75,150 Residential Division 280,570 Residential Division 48,600 Administrative expenses: Sales: Commercial Division $100,200 Commercial Division $835,040 Residential Division 100,200 Residential Division 501,020 Prepare divisional income statements for South Seas Coast Construction Company. South Seas Coast Construction Company Divisional Income Statements For the Year Ended June 30, 20Y8 CommercialDivision ResidentialDivision
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The sales, income from operations, and invested assets for each division of Grosbeak Company are as follows: Sales Income fromOperations InvestedAssets Division E $5,000,000 $550,000 $2,400,000 Division F 4,800,000 860,000 2,500,000 Division G 7,000,000 860,000 2,900,000 a. Using the DuPont formula, determine the profit margin, investment turnover, and rate of return on investment for each division. Round profit margin to two decimal places, investment turnover to four decimal places and rate of return on investment to one decimal place. Division E Division F Division G Profit Margin % % % Investment Turnover Rate of return on investment % % % b. Which division is the most profitable per dollar invested?
The following data are taken from the management accounting reports of Dulcimer Co.: Div. A Div. B Div. C Income from operations $1,900,000 $1,450,000 $1,450,000 Total service department charges 1,700,000 1,050,000 1,100,000 If an incentive bonus is paid to the manager who achieved the highest income from operations before service department charges, it follows that a. Divisions B and C's managers divide the bonus b. Division B's manager is given the bonus c. Division A's manager is given the bonus d. Division C's manager is given the bonus When management seeks to achieve personal departmental objectives that may work to the detriment of the entire company, the manager is experiencing a. budgetary slack b. cushions c. padding d. goal conflict The Ramapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data for the products and departments are listed below. Product Number ofUnits Labor…
The sales, income from operations, and invested assets for each division of Wren Company are as follows: 　　 Sales Income from Operations Invested Assets Division C $5,000,000 $630,000 $4,000,000 Division D 6,800,000 760,000 3,900,000 Division E 3,750,000 750,000 7,500,000 Management has established a minimum rate of return for invested assets of 10%. What is the Residual Income for Division C? What is the Residual Income for Division D? What is the Residual Income for Division E? Based on Residual Income, Division __?__ is the most profitable.
Divisional Income Statements The following data were summarized from the accounting records for Jersey Coast Construction Company for the year ended June 30, 20Y8: Cost of goods sold: Service department charges: Commercial Division $348,510 Commercial Division $47,520 Residential Division 171,510 Residential Division 29,710 Administrative expenses: Net sales: Commercial Division $63,370 Commercial Division $528,050 Residential Division 61,250 Residential Division 306,270 Prepare divisional income statements for Jersey Coast Construction Company. Jersey Coast Construction Company Divisional Income Statements For the Year Ended June 30, 20Y8 Commercial Division Residential Division Income from operations before service department charges $fill in the blank 2 $fill in the blank 3 Cost of goods sold fill in the blank 5 fill in the blank 6 Gross profit $fill in the blank 8 $fill in the blank 9 Administrative…
Corycorn Corp. and its divisions (each is an operating segment) are engaged solely in manufacturing operations. The following data (consistent with prior years' data) pertain to the operations conducted for the yaer ended December 31, year 1: (Industry Operating Segment) Total revenue Operating profit Identifiable assets at 12/31/Y1 A P10,000,000 P1,750,000 P20,000,000 B 8,000,000 1,400,000 17,500,000 C 6,000,000 1,200,000 12,500,000 D 3,000,000 550,000 7,500,000 E 4,250,000 675,000 7,000,000 F…