Introduction to Managerial Accounting - Connect Access
8th Edition
ISBN: 9781260519020
Author: BREWER
Publisher: MCG
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Chapter 10, Problem 6E
To determine
Calculating Margin, Turnover and Return of Income for Division: In order to find the performance of a department, Parameters such as Margin, Turnover and return of income are used- Margin: This is a ratio of Net Income to Sales, Turnover: This is a Ratio of Sales to Assets and Return of Income: This is a Ratio of Net Income to Assets.
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Contrasting Return on Investment (ROI) and Residual Income
Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow:
Required:
1. For each division, compute the return on investment (ROI) in terms of margin and turnover. Where necessary, carry computations to two decimal places.
2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 15%. Compute the residual income for each division.
3. Is Yokohama’s greater amount of residual income an indication that it is better managed? Explain.
Meiji Isetan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two
divisions follow:
Sales
Net operating income.
Average operating assets.
Required 1 Required 2
Required:
1. For each division, compute the return on investment (ROI) in terms of margin and turnover.
2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any
division is 12%. Compute the residual income for each division.
3. Is Yokohama's greater amount of residual income an indication that it is better managed?
Complete this question by entering your answers in the tabs below.
ROI
Osaka
$ 9,100,000
$ 455,000
$ 2,275,000
Osaka
%
Division
Required 3
For each division, compute the return on investment (ROI) in terms of margin and turnover.
Yokohama
$ 21,000,000
$ 1,470,000
$ 10,500,000
Yokohama
%
Meiji Isetan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two
divisions follow:
Sales
Net operating income
Average operating assets
Required 1 Required 2
Required:
1. For each division, compute the return on investment (ROI) in terms of margin and turnover.
2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any
division is 16%. Compute the residual income for each division.
3. Is Yokohama's greater amount of residual income an indication that it is better managed?
Osaka
$ 10,600,000
$ 742,000
$ 2,650,000
Complete this question by entering your answers in the tabs below.
ROI
%
Division
Required 3
For each division, compute the return on investment (ROI) in terms of margin and turnover.
Osaka
Yokohama
Yokohama
$ 36,000,000
$ 3,240,000
$ 18,000,000
%
Chapter 10 Solutions
Introduction to Managerial Accounting - Connect Access
Ch. 10 - What is meant by the term decentralization?Ch. 10 - What benefits result from decentralization?Ch. 10 - Distinguish between a cost center, a profit...Ch. 10 - What is meant by the terms margin and turnover in...Ch. 10 - Prob. 5QCh. 10 - In what way can the use of ROI as a performance...Ch. 10 - What is the difference between delivery cycle tame...Ch. 10 - What does a manufacturing cycle efficiency (MCE)...Ch. 10 - Prob. 9QCh. 10 - Prob. 10Q
Ch. 10 - Prob. 1AECh. 10 - Prob. 2AECh. 10 - Westerville Company reported the following result...Ch. 10 - Westerville Company reported the following result...Ch. 10 - Westerville Company reported the following result...Ch. 10 - Westerville Company reported the following result...Ch. 10 - Westerville Company reported the following result...Ch. 10 - Prob. 6F15Ch. 10 - Westerville Company reported the following result...Ch. 10 - Westerville Company reported the following result...Ch. 10 - Prob. 9F15Ch. 10 - Westerville Company reported the following result...Ch. 10 - Westerville Company reported the following result...Ch. 10 - Westerville Company reported the following result...Ch. 10 - Westerville Company reported the following result...Ch. 10 - Westerville Company reported the following result...Ch. 10 - Westerville Company reported the following result...Ch. 10 - Compute the Return or Investment (ROI) Alyeska...Ch. 10 - Residual Income Jumper Design Lid of Manchester....Ch. 10 - Measures of Internal Business Process Performance...Ch. 10 - Building a Balanced Scorecard Lost Peak ski resort...Ch. 10 - Return on Investment (ROI) Provide the missing...Ch. 10 - Prob. 6ECh. 10 - Creating a Balanced Scorecard Ariel Tax Services...Ch. 10 - Computing and Interpreting Return on Investment...Ch. 10 - Return on Investment (ROI) and Residual Income...Ch. 10 - Cost-Volume-Profit Analysis and Return on...Ch. 10 - Effects of Charges in Profits arid Assets on...Ch. 10 - Prob. 12ECh. 10 - Effects of Changes in Sales, Expenses, and Assets...Ch. 10 - Measures of Internal Business Process Performance...Ch. 10 - Prob. 15PCh. 10 - Creating a Balanced Scorecard Mason Paper Company...Ch. 10 - Comparison of Performance Using Return on...Ch. 10 - Return on Investment (ROI) and Residual Income "I...Ch. 10 - Internal Business Process Performance Measures...Ch. 10 - Return on Investment (ROI) Analysis The...Ch. 10 - Creating Balanced Scorecards that Support...Ch. 10 - Prob. 22P
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- Refer to the data given in Exercise 10.8. Required: 1. Compute the residual income for each of the opportunities. (Round to the nearest dollar.) 2. Compute the divisional residual income (rounded to the nearest dollar) for each of the following four alternatives: a. The Espresso-Pro is added. b. The Mini-Prep is added. c. Both investments are added. d. Neither investment is made; the status quo is maintained. Assuming that divisional managers are evaluated and rewarded on the basis of residual income, which alternative do you think the divisional manager will choose? 3. Based on your answer in Requirement 2, compute the profit or loss from the divisional managers investment decision. Was the correct decision made?arrow_forwardTan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Sales Net operating income Average operating assets Required 1 Required 2 Required: 1. For each division, compute the return on investment (ROI). 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 17%. Compute the residual income for each division. Complete this question by entering your answers in the tabs below. ROI Osaka $ 10,100,000 $ 808,000 $ 2,525,000 Osaka Division For each division, compute the return on investment (ROI). % Yokohama $ 31,000,000 $ 3,100,000 $ 15,500,000 Yokohama %arrow_forwardTan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Sales Net operating income Average operating assets Required 1 Required 2 Required: 1. For each division, compute the return on investment (ROI). 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 18%. Compute the residual income for each division. Complete this question by entering your answers in the tabs below. ROI Osaka $ 9,400,000 $ 752,000 $ 2,350,000 Osaka Division For each division, compute the return on investment (ROI). % Yokohama $ 24,000,000 $ 2,400,000 $8,000,000 Yokohama %arrow_forward
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