EBK HORNGREN'S COST ACCOUNTING
16th Edition
ISBN: 8220103631723
Author: Rajan
Publisher: YUZU
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Textbook Question
Chapter 23, Problem 23.34P
- 1. Calculate ROI for each division using net book value of total assets. Required
- 2. Using the technique in Figure 23-2, compute ROI using current-cost estimates for long-term assets and
depreciation expense. The construction cost index for 2017 is 122. Estimated useful life of operational assets is 15 years. - 3. How does the choice of long-term asset valuation affect management decisions regarding new capital investments? Why might this choice be more significant to the St. Louis division manager than to the New Orleans division manager?
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ROI, measurement alternatives for performance measures Appleton’s owns and operates a variety of casual dining restaurants in three cities: St. Louis, Memphis, and New Orleans. Each geographic market is considered a separate division. The St. Louis division includes four restaurants, each built in early 2007. The Memphis division consists of three restaurants, each built in January 2011. The New Orleans division is the newest, consisting of three restaurants built 4 years ago. Division managers at Appleton’s are evaluated on the basis of ROI. The following information refers to the three divisions at the end of 2017:
) Sales Mix Analysis
Delving further into the operations, another branch which is in the restaurant business is brought into focus.
Management desires a net income of $ 135,000 from this division which has fixed costs of $ 300,000 per year.
The following information about the operations of the division for the past two years has been supplied.
(please refer to image)
You are required to prepare a report to show :
1. The total sales required to achieve the desired net income
2. The total sales of each product required to meet the objective.
Faced with headquarters’ desire to add a new product line, Stefan Grenier, manager of Bilti Products’ East Division, felt that he had to see the numbers before he made a move. His division’s ROI has led the company for three years, and he doesn’t want any letdown.
Bilti Products is a decentralized wholesaler with four autonomous divisions. The divisions are evaluated on the basis of ROI, with year-end bonuses given to divisional managers who have the highest ROI. Operating results for the company’s East Division for last year are given below:
Sales
$
28,700,000
Variable expenses
14,390,000
Contribution margin
14,310,000
Fixed expenses
12,301,000
Operating income
$
2,009,000
Divisional operating assets
$
7,175,000
The company had an overall ROI of 16% last year (considering all divisions). The new product line that headquarters wants Grenier’s East Division to add would require an investment of $4,100,000. The cost and revenue characteristics…
Chapter 23 Solutions
EBK HORNGREN'S COST ACCOUNTING
Ch. 23 - Prob. 23.1QCh. 23 - Prob. 23.2QCh. 23 - What factors affecting ROI does the DuPont method...Ch. 23 - RI is not identical to ROI, although both measures...Ch. 23 - Describe EVA.Ch. 23 - Give three definitions of investment used in...Ch. 23 - Distinguish between measuring assets based on...Ch. 23 - Prob. 23.8QCh. 23 - Why is it important to distinguish between the...Ch. 23 - Prob. 23.10Q
Ch. 23 - Managers should be rewarded only on the basis of...Ch. 23 - Explain the role of benchmarking in evaluating...Ch. 23 - Explain the incentive problems that can arise when...Ch. 23 - Prob. 23.14QCh. 23 - Prob. 23.15QCh. 23 - During the current year, a strategic business unit...Ch. 23 - Assuming an increase in price levels over time,...Ch. 23 - If ROI Is used to evaluate a managers performance...Ch. 23 - The Long Haul Trucking Company is developing...Ch. 23 - ABC Inc. desires to maintain a capital structure...Ch. 23 - ROI, comparisons of three companies. (CMA,...Ch. 23 - Prob. 23.22ECh. 23 - ROI and RI. (D. Kleespie, adapted) The Sports...Ch. 23 - ROI and RI with manufacturing costs. Excellent...Ch. 23 - ROI, RI, EVA. Hamilton Corp. is a reinsurance and...Ch. 23 - Goal incongruence and ROI. Comfy Corporation...Ch. 23 - ROI, RI, EVA. Performance Auto Company operates a...Ch. 23 - Capital budgeting, RI. Ryan Alcoa, a new associate...Ch. 23 - Prob. 23.29ECh. 23 - ROI, RI, EVA, and performance evaluation. Cora...Ch. 23 - Prob. 23.31ECh. 23 - Prob. 23.32ECh. 23 - ROI performance measures based on historical cost...Ch. 23 - ROI, measurement alternatives for performance...Ch. 23 - Multinational firms, differing risk, comparison of...Ch. 23 - ROI, Rl, DuPont method, investment decisions,...Ch. 23 - Division managers compensation, levers of control...Ch. 23 - Executive compensation, balanced scorecard. Acme...Ch. 23 - Financial and nonfinancial performance measures,...Ch. 23 - Prob. 23.40PCh. 23 - Prob. 23.41PCh. 23 - RI, EVA, measurement alternatives, goal...
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