EBK CORNERSTONES OF COST MANAGEMENT
3rd Edition
ISBN: 8220100474972
Author: MOWEN
Publisher: CENGAGE L
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Textbook Question
Chapter 10, Problem 22E
Wexford Co. has a subunit that reported the following data for Year 1:
Asset (investment) turnover: 1.5 times
Sales: $750,000
Return on sales: 8%
The imputed interest rate is 12%. What is the division residual income for Year 1?
- a. $60,000
- b. $30,000
- c. $20,000
- d. $0
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Jordan Company has two divisions, which reported the following results for the most recent year.
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₱ 00,600,000
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₱ 18,000,000
₱ 03,000,000
ROI
15%
20%
Imputed interest rate = 10%
What is the residual income of Division II?
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Selected data from an investment center of IROL Inc. follow:Sales $8,000,000Net book value of assets, beginning 2,500,000Net book value of assets, ending 2,600,000Net operating income 640,000Minimum rate of return 12%Required1. Calculate return on sales (ROS), asset turnover (AT), and return on investment (ROI).2. Calculate residual income (RI).
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Data for Divisions A, B, C, D, and E are as follows:
a. Determine the missing items. Round rate of return on investment, profit margin, and investment turnover answers to one decimal place when required.
Div.
Sales
Income from Operations
Inv. Assets
Rate of Return on Inv.
Profit Margin
Invest. Turnover
A
$
$35,000
$200,000
%
%
1.6
B
$455,000
$
$284,375
16%
%
C
$525,000
$73,500
$
%
%
1.2
D
$800,000
$
$
%
13.0%
2.5
E
$
$
$250,000
%
16.0%
2.0
b. Which division is most profitable in terms of income from operations?
c. Which division is most profitable in terms of rate of return on investment?
Chapter 10 Solutions
EBK CORNERSTONES OF COST MANAGEMENT
Ch. 10 - Prob. 1DQCh. 10 - Explain why firms choose to decentralize.Ch. 10 - Explain how access to local information can...Ch. 10 - What are margin and turnover? Explain how these...Ch. 10 - What are the three benefits of ROI? Explain how...Ch. 10 - What are two disadvantages of ROI? Explain how...Ch. 10 - What is residual income? Explain how residual...Ch. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - What is a transfer price?
Ch. 10 - Prob. 11DQCh. 10 - If the minimum transfer price of the selling...Ch. 10 - If an outside, perfectly competitive market exists...Ch. 10 - Prob. 14DQCh. 10 - Prob. 15DQCh. 10 - Forchen, Inc., provided the following information...Ch. 10 - Refer to Cornerstone Exercise 10.1. Forchen, Inc.,...Ch. 10 - Ignacio, Inc., had after-tax operating income last...Ch. 10 - Prob. 4CECh. 10 - Prob. 5CECh. 10 - Prob. 6CECh. 10 - Jarriot, Inc., presented two years of data for its...Ch. 10 - Refer to Exercise 10.7 for data. At the end of...Ch. 10 - Refer to the data given in Exercise 10.8....Ch. 10 - Brewster Company manufactures elderberry wine....Ch. 10 - Xenold, Inc., manufactures and sells cooktops and...Ch. 10 - Prob. 12ECh. 10 - Jocassee Furniture Manufacturing, Inc., has a...Ch. 10 - Prob. 14ECh. 10 - Mossfort, Inc., has a division in Canada that...Ch. 10 - A multinational corporation has a number of...Ch. 10 - Consider the data for each of the following four...Ch. 10 - The following selected data pertain to the Argent...Ch. 10 - Prob. 19ECh. 10 - Prob. 20ECh. 10 - SkyBound Airlines provided the following...Ch. 10 - Wexford Co. has a subunit that reported the...Ch. 10 - Prob. 23ECh. 10 - Prob. 24ECh. 10 - Prob. 25PCh. 10 - Prob. 26PCh. 10 - Prob. 27PCh. 10 - Prob. 28PCh. 10 - Oriole, Inc., owns a number of food service...Ch. 10 - Prob. 30PCh. 10 - Prob. 31PCh. 10 - Prob. 32PCh. 10 - Jump Start Company (JSC), a subsidiary of Mason...Ch. 10 - Prob. 34PCh. 10 - Grate Care Company specializes in producing...
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