Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
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Chapter 10, Problem 9E
A family friend has asked vow help in analyzing the operations of three anonymous companies operating in the same service sector industry. Supply the missing data in the table below:
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Return on Investment (ROI) and Residual Income Relations
A family friend has asked your help in analyzing the operations of three anonymous companies operating in the same service sector industry. Supply the missing data in the table below:
Instructions: Designate the best answer for each of the following questions.
1.Which of the following is a responsibility center that incurs expenses, generates revenues, and is responsible for generating a return on assets?
a. Cost center
b. Revenue center
c. Profit center
d. Investment center
2.Which one of the following is the most useful measure for evaluating a manager's performance in controlling revenues and costs in a profit center?
a. Contribution margin
b. Contribution net income
c. Contribution gross profit
d. Controllable margin
3.Hanover Corporation desires to earn target net income of $42,000. The selling price per unit is $18, unit variable cost is $5.60, and total fixed costs are $123,912. How many units must the company sell to earn its target net income?
a. 13,380
b. 9,993
c. 3,387
d. 9,217
4.Remark…
Effects of Changes in Profits and Assets on Return on Investment (ROI)
Fitness Fanatics is a regional chain of health clubs. The managers of the clubs, who have authority to make investments as needed, are evaluated based largely on return on investment (ROI). The company’s Springfield Club reported the following results for the past year:
Required:
The following questions are to be considered independently. Carry out all computations to two decimal places.
1. Compute the Springfield club’s return on investment (ROI).
2. Assume that the manager of the club is able to increase sales by $70,000 and that, as a result, net operating income increases by $18,200. Further assume that this is possible without any increase in average operating assets. What would be the club’s return on investment (ROI)?
3. Assume that the manager of the club is able to reduce expenses by $14,000 without any change in sales or average operating assets. What would be the club’s return on investment (ROI)?
4.…
Chapter 10 Solutions
Introduction To Managerial Accounting
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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- Consider the following list of scorecard measures: a. Product profitability b. Ratings from customer surveys c. Number of patents pending d. Strategic job coverage ratio e. Revenue per employee f. Quality costs g. Percentage of market h. Employee turnover percentages i. First-pass yields j. On-time delivery percentage k. Percentage of revenues from new sources l. Economic value added Required: Classify each measure according to the following: perspective, financial or nonfinancial, subjective or objective, and external or internal. When the perspective is process, identify which type of process: innovation, operations, or post-sales service.arrow_forwardExplain the benefits of a residual income structure within an investment center framework. It may help to think of an example using an existing company.arrow_forwardAssume you have been hired by Cabelas Sporting Goods. As part of your new role in the accounting department, you have been tasked to set up a responsibility accounting structure for the company. As your first task, your supervisor has asked you to give an example of a cost center, profit center, and an investment center within the Cabelas organization. Your supervisor is a little unsure of the difference between a profit center and investment center and would like you to explain the difference.arrow_forward
- Describing the balanced scorecard and identifying key performance indicators for each perspective Consider the following key performance indicators, and classify each according to the balanced scorecard perspective it addresses. Choose from financial perspective, customer perspective, internal business perspective, or learning and growth perspective. a. Number of employee suggestions implemented b. Revenue growth c. Number of on-time deliveries d. Percentage of sales force with access to real-time inventory levels e. Customer satisfaction ratings f. Number of defects found during manufacturing g. Number of warranty claims h. Return on investment i. Variable cost per unit j. Percentage of market share k. Number of hours of employee training l. Number of new products developed m. Yield rate (number of units produced per hour) n. Average repair time o. Employee satisfaction p. Number of repeat customersarrow_forwarda. What is the box annual sales volume for each area to be able to compete on a competitive advantage strategy with competitors? b. What do you suggest to the company based on the cost data above for the location of its factory construction? Explain why and use the calculation data so that decision making can be in accordance with the company strategy that you have learned.arrow_forwardDescribing the balanced scorecard and identifying key performance indicators for each perspective Consider the following key performance indicators, and classify each indicator according to the balanced scorecard perspective it addresses. Choose from the financial perspective, customer perspective, internal business perspective, and the learning and growth perspective. a. Number of customer complaints b. Number of information system upgrades completed c. Residual income d. New product development time e. Employee turnover rate f. Percentage of products with online help manuals g. Customer retention h. Percentage of compensation based on performance i. Percentage of orders filled each week j. Gross margin growth k. Number of new patents l. Employee satisfaction ratings m. Manufacturing cycle time (average length of production process) n. Earnings growth o. Average machine setup time p. Number of new customers q. Employee promotion rate r. Cash flow from operations s. Customer…arrow_forward
- Which of the following is a key performance indicator of the internal business perspective in a balanced scorecard? A. return on investment B. hours of employee training C. number of warranty claims received D. percentage of market sharearrow_forwardWhich of the following would most appropriately be evaluated as a “profit center”? Group of answer choices a)Maintenance operations for American Airlines b)A warehouse operation for Amazon c)A hotel restaurant that caters to both hotel guests and non-guests d)Sales division for a large publisherarrow_forwardWhich of the following is a key performance indicator of the internal business perspective of the balanced scorecard? A. employee turnover B. number of units produced per hour C. number of cross-trained employees D. cash flowarrow_forward
- The Balanced Scorecard: Stakeholder Values. In the balanced scorecard approach, stakeholder groups with different perspectives value different performance goals. Sometimes, however, they may be interested in the same goal. Indicate which stakeholder groups—financial (F), learning and growth (L), internal business processes (P), and customers (C)— value the following performance goals: High wage Safe products. Low-priced products Improved return on investment Job security Cost-effective production processes XYZ Co. wants to know if its profitability performance has increased from 2009 to 2010. The company had net income of $48,000 in 2009 and $50,000 in 2010. Total assets were $480,000 at the end of 2009, and $560,000 at the end of 2010. Calculate return on assets(ROA) for 2009 and 2010and Comment on the results.arrow_forwardDescribing the balanced scorecard and identifying key performance indicators for each perspective Consider the following key performance indicators, and classify each indicator according to the balanced scorecard perspective it addresses. Choose from the financial perspective, customer perspective, internal business perspective, and the learning and growth perspective. Number of customer complaints Number of information system upgrades completed Residual income New product development time Employee turnover rate Percentage of products with online help manuals Customer retention Percentage of compensation based on performance Percentage of orders filled each week Gross margin growth Number of new patents Employee satisfaction ratings Manufacturing cycle time (average length of the production process) Earnings growth Average machine setup time Number of new customers Employee promotion rate Cash flow from operations Customer satisfaction ratings Machine downtime Finished products per…arrow_forwardUsing ROI and RI to evaluate investment centers Zims, a national manufacturer of lawn-mowing and snow-blowing equipment, segments its business according to customer type: professional and residential. The following divisional information was available for the past year: Management has 21 26% target rate of return for each division. Requirements Calculate each division’s ROI. Round all of your answers to four decimal places. Calculate each division’s profit margin ratio. Interpret your results. Calculate each division’s asset turnover ratio. Interpret your results. Use the expanded ROI formula to confirm your results from Requirement 1. What can you conclude.arrow_forward
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