Introduction to Managerial Accounting - Connect Access
8th Edition
ISBN: 9781260519020
Author: BREWER
Publisher: MCG
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Chapter 10, Problem 8E
Computing and Interpreting 
Selected operating data for divisions of Outback Brewing, Let., of Australia are given below:
Required:
1. Compute the
2. Which divisional manager seems to be doing the better job? Why?
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Computing and Interpreting Return on Investment
Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below:
Required:
1. Compute the rate of return for each division using the return on investment (ROI) formula stated in terms of margin and turnover.
2. Which divisional manager seems to be doing the better job? Why?
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.
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Exercise 10-12 Evaluating New Investments Using Return on Investment (ROI) and Residual Income
(LO10-1, LO10-2]
Selected sales and operating data for three divisions of different structural engineering firms are given as follows:
Division A
$ 6,300,000
$ 1,260,000
340,200
Division B
$ 10,300,000
$ 5,150,000
968,200
18.80%
Division C
$ 9,400,000
$ 1,880,000
24
Sales
Average operating assets
Net operating income
Minimum required rate of return
2$
249,100
20.00%
17.00%
Required:
1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover.
2. Compute the residual income (loss) for each division.
3. Assume that each division is presented with an investment opportunity that would yield a 20% rate of return.
a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity?
b. If performance is being measured by residual income, which division or divisions will probably accept or…
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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- Profit Margin, Investment Turnover, and Return on Investment The condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as follows (assuming no support department allocations): Sales Cost of goods sold Gross profit Administrative expenses Operating income The manager of the Consumer Products Division is considering ways to increase the return on investment. a. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that $143,750,000 of assets have been invested in the Consumer Products Division. If required, round your answers to one decimal place. Profit margin $230,000,000 (126,500,000) $103,500,000 (64,400,000) $39,100,000 Investment turnover Return on investment % Investment turnover Return on investment b. If expenses could be reduced by $3,450,000 without decreasing sales, what would be the impact on the profit margin, investment…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_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_forward
- 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 %arrow_forwardComparison of Performance Using Return on Investment (ROI) Comparative data on three companies in the same service industry are given below: Required: 1. What advantages are there to breaking down the ROI computation into two separate elements, margin and turnover? 2. Fill in the missing information above, and comment on the relative performance of the three companies in as much detail as the data permit. Makearrow_forwardSelected operating data for two divisions of Outback Brewing, Limited, of Australia are given below: Sales Average operating assets Net operating income Property, plant, and equipment (net) Division Queensland $ 1,302,000 $ 620,000 Queensland division New South Wales division $ 71,610 $ 239,ᎾᎾᎾ % % Required: 1. Compute each division's margin, turnover, and return on investment (ROI). 2. Which divisional manager seems to be doing the better job? New South Wales $ 2,444,000 $ 520,000 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the rate of return for each division using the return on investment (ROI) formula stated in terms of margin and turnover. (Round your answers to 2 decimal places.) Margin Turnover $ 61,100 $ 189,000 ROI % paarrow_forward
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