Financial & Managerial Accounting
14th Edition
ISBN: 9781337119207
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 23, Problem 23.11EX
(a)
To determine
Residual income: The remaining income from operations after deducting the desired acceptable income is referred to as residual income.
Formula of residual income:
| Income from operations | XXX |
| Less minimum acceptable income from operations as a percent of invested assets | XXX |
| Residual income | XXX |
Table (1)
To determine: Residual income of for each division
(b)
To determine
The division with highest residual income.
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Based on the data in problem 24- 4 above, assume that management has established a 10%minimum acceptable rate of return for invested assets.
a. Determine the residual income for each division.b. Which division has the most residual income?
a. Compute the rate of return on investment for each division. b. Which division is the most profitable per dollar invested?
Assume that management has established a 10% minimum acceptable rate of return for invested assets.
c. Determine the residual income for each division. d. Which division has the most residual income?
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.
Chapter 23 Solutions
Financial & Managerial Accounting
Ch. 23 - Prob. 1DQCh. 23 - Differentiate between a profit center and an...Ch. 23 - Weyerhaeuser developed a system that assigns...Ch. 23 - What is the major shortcoming of using income from...Ch. 23 - In a decentralized company in which the divisions...Ch. 23 - How does using the return on investment facilitate...Ch. 23 - Why would a firm use a balanced scorecard in...Ch. 23 - Prob. 8DQCh. 23 - When is the negotiated price approach preferred...Ch. 23 - When using the negotiated price approach to...
Ch. 23 - Budgetary performance for cost center Vinton...Ch. 23 - Service department charges The centralized...Ch. 23 - Income from operations for profit center Using the...Ch. 23 - Profit margin, investment turnover, and ROI Briggs...Ch. 23 - Residual income The Commercial Division of Galena...Ch. 23 - Transfer pricing The materials used by the...Ch. 23 - Budget performance reports for cost centers...Ch. 23 - Divisional income statements The following data...Ch. 23 - Service department charges and activity bases For...Ch. 23 - Service department charges In divisional income...Ch. 23 - Service department charges and activity bases...Ch. 23 - Divisional income statements with service...Ch. 23 - Prob. 23.8EXCh. 23 - Profit center responsibility reporting XSport...Ch. 23 - Return on investment The income from operations...Ch. 23 - Prob. 23.11EXCh. 23 - Determining missing items in return on investment...Ch. 23 - Profit margin, investment turnover, and return on...Ch. 23 - Prob. 23.14EXCh. 23 - Prob. 23.15EXCh. 23 - Determining missing items from computations Data...Ch. 23 - Prob. 23.17EXCh. 23 - Building a balanced scorecard Hit-n-Run Inc. owns...Ch. 23 - Decision on transfer pricing Materials used by the...Ch. 23 - Prob. 23.20EXCh. 23 - Prob. 23.1APRCh. 23 - Profit center responsibility reporting for a...Ch. 23 - Divisional income statements and return on...Ch. 23 - Effect of proposals on divisional performance A...Ch. 23 - Divisional performance analysis and evaluation The...Ch. 23 - Prob. 23.6APRCh. 23 - Budget performance report for a cost center The...Ch. 23 - Profit center responsibility reporting for a...Ch. 23 - Divisional income statements and return on...Ch. 23 - Effect of proposals on divisional performance A...Ch. 23 - Divisional performance analysis and evaluation The...Ch. 23 - Prob. 23.6BPRCh. 23 - Prob. 1ADMCh. 23 - Domino's Pizza: Franchise segment return on...Ch. 23 - Prob. 3ADMCh. 23 - Prob. 23.1TIFCh. 23 - Prob. 23.3TIF
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