Financial & Managerial Accounting
14th Edition
ISBN: 9781337119207
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 23, Problem 2ADM
Domino's Pizza: Franchise segment
Domino's Pizza, Inc. is the second-largest pizza chain in the world. In the United States, Domino’s has 377 company-owned restaurants and 4,690 franchised restaurants. In addition, Domino's lias a supply chain that manufactures and delivers dough and other food products to all the domestic restaurants. Franchisees are required to purchase food products from the Domino's supply chain as part of their franchise agreement. Thus, in the United States, Domino's has three segments: Company-Owned Restaurants, Franchised Restaurants, and Supply Chain. Operating data for these three segments in the United States are as follows (in millions):
| Company-Owned Restaurants | Franchised Restaurants | Supply Chain | |
| Sales | $348 | $230 | $1,262 |
| Cost of sales | 267 | 1,132 | |
| General and administrative expenses* | 25 | 125 | 100 |
| Invested assets** | 32 | 30 | 146 |
*Allocation to segments assumed
**Allocation between Company-Owned and Franchised assumed
- A. Determine the income from operations for each segment.
- B. Determine the profit margin for each segment. (Round percentages to one decimal place.)
- C. Determine the investment turnover for each segment. (Round to one decimal place.)
- D. Use the DuPont formula to determine the return on investment for each segment. (Round to nearest whole percent.)
- E. Explain Domino’s business model and how it is related to ROI in each segment.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Transfer Price with an Outside Market
Hrubec Products. Inc., operates a Pulp Division that manufactures wood pulp for use in the production of various paper goods. Revenue and costs associated with a ton of pulp follow:
Hrubec Products has just acquired a small company that manufactures paper cartons. This company will be treated as a division of Hrubec with full profit responsibility. The newly formed Carton Division is currently purchasing 5,000 tons of pulp per year from a supplier at a cost of $70 per ton, less a 10% purchase discount. Hrubec’s president is anxious for the Carton Division to begin purchasing its pulp from the Pulp Division if an acceptable transfer price can be worked out.
Required:
For (1) and (2) below, assume the Pulp Division can sell all of its pulp to outside customers for $70 per ton.
1. What is the lowest acceptable transfer price from the perspective of the Pulp Division? What is the highest acceptable transfer price from the perspective of the Carton…
Table 1. Estimated cost of ‘Sunbeam’ appliances at Coles’ selected stores.
Costs
$
Variable acquisition cost per appliance
$15
Fixed costs to distribute these appliances
Salaries and wages
Quality assurance
After-sales services (e.g. warranty, substitution)
$17,000
9,000
3,800
Total fixed costs
$29,800
Coles Melbourne Central is an Australian-based exclusive store of Coles Group, an Australian chain of supermarkets. Its bulk of sales is made on fresh produces. Coles Melbourne Central store identifies three major activities and cost pools related to the fresh produces: ordering (from Coles Distribution Centre), receiving (from Coles Distribution Centre) and shelfing (Table 2):
Table 2. Activities at Coles Melbourne Central and Activity cost rates.
Activity
Cost driver
Qty of cost driver
Cost per unit of cost driver
Ordering from Coles DC
# of orders
500
$50 per order
Receiving from Coles DC
# of loads moved
400
$30 per load…
Krispy Kreme Doughnuts, Inc. (KKD) is a leading retailer and wholesaler of doughnuts. Krispy Kreme owns or franchises more than 1,100 stores where the “hot" light tells you if doughnuts are cooking. Dunkin* Brands Group, Inc. (DNKN) is a leading franchisor of doughnut (Dunkin' Donuts) and ice cream (Baskin-Robbins) shops with more than 20,000 stores worldwide. Selected financial statement information for a recent year for both companies follows (in thousands):
a. Determine the days' cash on hand for each company. Round all calculations to one decimal place.b. Which company appears to have the stronger cash liquidity position?
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
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Papa Johns International, Inc. (PZZA), operates over 5,000 restaurants in the United States and 45 countries. The company operates primarily as a franchisor with 4,353 franchised restaurants and 744 company-operated restaurants. Recent data (in millions) for the company-operated and North America franchised restaurants are as follows: a. Determine the profit margin for each segment. Round to one decimal place. b. Determine the investment turnover for each segment. Round to two decimal places. c. Use the DuPont formula to determine the return on investment for each segment. Round to one decimal place. d. Analyze and interpret the results of (a), (b), and (c).arrow_forwardPanera Bread Company (PNRA) operates over 2,000 bakery-cafe locations throughout the United States and Canada and serves over 9 million customers per week. Paneras operations are divided into the following segments: Company-Operated Bakery-Cafes Franchised Bakery-Cafes Fresh Dough and Other Products The Fresh Dough and Other Products segment supplies fresh dough, produce, tuna, and other products to the company-operated and franchised cafes. Recent data (in millions) for each of these segments are as follows: a. Determine the profit margin for each segment. Round to one decimal place. b. Determine the investment turnover for each segment. Round to two decimal places. c. Use the DuPont formula to determine the return on investment for each segment. Round to one decimal place. d. Which segment has the highest profit margin, investment turnover, and return on investment? Explain why. e. If franchised cafes are more profitable, why would Panera operate company- owned cafes? MAD 24-3 Analyze Papa Johns International, Inc.Obj. 6 Papa Johns International, Inc. (PZZA), operates over 5,000 restaurants in the United States and 45 countries. The company operates primarily as a franchisor with 4,353 franchised restaurants and 744 company-operated restaurants. Recent data (in millions) for the company-operated and North America franchised restaurants are as follows: a. Determine the profit margin for each segment. Round to one decimal place. b. Determine the investment turnover for each segment. Round to two decimal places. c. Use the DuPont formula to determine the return on investment for each segment. Round to one decimal place. d. Analyze and interpret the results of (a), (b), and (c). MAD 24-4 Compare Panera Bread and Papa JohnsObj. 6 Compare Panera Bread (PNRA) and Papa Johns (PZZA) using your computations from MAD 24-2 and MAD 24-3.arrow_forwardPanera Bread Company (PNRA) operates over 2,000 bakery-cafe locations throughout the United States and Canada and serves over 9 million customers per week. Paneras operations are divided into the following segments: Company-Operated Bakery-Cafes Franchised Bakery-Cafes Fresh Dough and Other Products The Fresh Dough and Other Products segment supplies fresh dough, produce, tuna, and other products to the company-operated and franchised cafes. Recent data (in millions) for each of these segments are as follows: a. Determine the profit margin for each segment. Round to one decimal place. b. Determine the investment turnover for each segment. Round to two decimal places. c. Use the DuPont formula to determine the return on investment for each segment. Round to one decimal place. d. Which segment has the highest profit margin, investment turnover, and return on investment? Explain why. e. If franchised cafes are more profitable, why would Panera operate company- owned cafes?arrow_forward
- Question: Better Food Company recently acquired an Olive Oil Processing division that has an annual capacity of 2,000,000 bottles of oil. The new division has been selling1,000,000 bottles of oil to the outside market for $4 per bottle, but Better Food wants the new division to transfer (or sell) 1,000,000 bottles of oil to the Pizza Manufacturing division. As of now, the Pizza Manufacturing is buying oil from Italy for $4.50. The current oil per unit cost for 2,000,000 bottles is: Dir Materials per bottle $1.00 Dir labor per bottle 0.50 Variable OH 0.24 Fixed OH 0.40 Total $2.14 As a company controller, what is the appropriate transfer price range that will make the new Olive Oil division and the Pizza Manufacturing division interested in this transfer?The minimun transfer price is: The maximum transfer price is:arrow_forwardRaddington Industries produces tool and die machinery for manufacturers. The company expanded vertically in 20x1 by acquiring one of its suppliers of alloy steel plates, Keimer Steel Company. To manage the two separate businesses, the operations of Keimer are reported separately as an investment center. Raddington monitors its divisions on the basis of both unit contribution and return on average investment (ROI), with investment defined as average operating assets employed. Management bonuses are determined on ROI. All investments in operating assets are expected to earn a minimum return of 13 percent before income taxes. Keimer's cost of goods sold is considered to be entirely variable, while the division's administrative expenses are not dependent on volume. Selling expenses are a mixed cost with 40 percent attributed to sales volume. Keimercontemplated a capital acquisition with an estimated ROI of 14.5 percent;however, division management decided against the investment because…arrow_forwardDuncan Multinational Corporation is a global manufacturer and distributor of household appliances. It is based in China, United States, Trinidad, and the United Kingdom. Sixty percent (60%) of supplies are sent to various companies throughout the four countries. It also markets its supplies through social media and brand ambassador and retail clients can make orders over the phone and they ship the supplies upon demand.The main competition for Duncan Multinational Corporation comes from one U.S. firm and one Canadian firm. The U.S firm and Canadian firm have approximately 45% market share in Barbados, Guyana and Jamaica. The marketing and transportation costs in these countries are very high.Section 1 Duncan Multinational Corporation plans to penetrate either the Jamaican, Barbados or Guyana market. Discuss two factors that deserve to be considered in deciding which market is more feasible? Discuss a demand-related factor and supply-related factor, that may influence exchange rate…arrow_forward
- Duncan Multinational Corporation is a global manufacturer and distributor of household appliances. It is based in China, United States, Trinidad, and the United Kingdom. Sixty percent (60%) of supplies are sent to various companies throughout the four countries. It also markets its supplies through social media and brand ambassador and retail clients can make orders over the phone and they ship the supplies upon demand. The main competition for Duncan Multinational Corporation comes from one U.S. firm and one Canadian firm. The U.S firm and Canadian firm have approximately 45% market share in Barbados, Guyana and Jamaica. The marketing and transportation costs in these countries are very high. Section 1 Duncan Multinational Corporation plans to penetrate either the Jamaican, Barbados or Guyana market. Discuss two factors that deserve to be considered in deciding which market is more feasible? Discuss a demand-related factor and supply-related factor, that may influence…arrow_forwardRetailer Checkers has launched a new state-of-the-art supermarket at Chartwell Corner in Dainfern,Gauteng, further growing its share of the premium grocery sector in South Africa.More than 40 new jobs were created with this store opening, and Checkers FX Chartwell Corner has103 employees, the group noted. In November Checkers announced a partnership with US coffee chain Starbucks which would seethe coffee house and roastery chain launch outlets in select supermarkets. The retailer said that the new store in North Joburg will offer several unique speciality services,including: • Fresh Krispy Kreme doughnuts, delivered daily;• An in-store Starbucks;• An in-store Kauai serving salads, wraps and smoothies;• A sit-down sushi bar;• Freshly-made artisanal bread, pastries and cakes;• More than 400 local and international cheeses;• Wines from over 100 estates and authentic French champagne. The Dainfern store is the latest addition to the Checkers’ FreshX brand, which takes on upmarketretailers…arrow_forwardStarwood Hotels (Starwood) owns and operates many hotel properties under well-known brand names, including Sheraton, W, Westin, and St. Regis. Starwood focuses on the upper end of the lodging industry. Choice Hotels (Choice) is primarily a franchisor of several hotel chains, including Comfort Inn, Sleep Inn, Clarion, EconoLodge, and Rodeway Inn. Choice properties represent primarily the midscale and economy segments of the lodging industry. Exhibit 4.39 (page 315) presents selected profitability ratios and other data for Starwood, and Exhibit 4.40 (page 315) presents data for Choice. (Note that ROCE is not meaningful for Choice because of negative common shareholders equity due to open market share repurchases, not accumulated deficits. As of the end of 2008, Choice had repurchased over one-third of all common shares issued: 34,640,510 out of 95,345,362 shares.) One of the closely followed metrics in the lodging industry is occupancy rate, which gives an indication of the capacity utilization of available hotel rooms. A second measure is the ADR (average daily rate), which measures the amount actually collected for an average room per night. Finally, REVPAR (revenue per available room) also is an important measure, which measures periodto-period growth in revenues per room for comparable properties (adjusted for properties sold or closed or otherwise not comparable across years). The interaction of occupancy rate and ADR is REVPAR. Exhibit 4.39 Exhibit 4.40 REQUIRED Analyze the changes and the differences in the profitability of these two hotel chains to the deepest levels available given the data provided. Compare and contrast the ROAs and ROCEs of both companies. Do the results match your prior expectations given the type of lodging for which each company specializes?arrow_forward
- Analyze El Pollo Loco Holdings, Inc. El Pollo Loco Holdings, Inc. (LOCO), Spanish for “The Crazy Chicken,” operates almost 500 restaurants, approximately 40% of which are company-owned and the rest are franchises. El Pollo Loco combines the culinary traditions of Mexico and California, creating unique menu items such as their signature Chicken Avocado Burrito. The company aims to improve profitability, in part, by simplifying operations to make it easier for employees and franchisees to run the restaurants. Recent data (in millions) for company-operated and franchised restaurants are as follows: Line Item Description Company-Operated Franchised Revenues $374 $29 Operating income 62 1 Invested assets 79 2 a. Determine the profit margin for each segment. Round to one decimal place. Line Item Description Profit margin Company-Operated fill in the blank 1% Franchised fill in the blank 2% b. Determine the investment turnover for each segment. Round to two decimal…arrow_forwardTransfer Pricing; Ethics Zen Manufacturing Inc. is a multinational firm with sales and manufacturing units in 15 countries. One of its manufacturing units, in country X, sells its product to a retailunit in country Y for $300,000. The unit in country X has manufacturing costs of $150,000 for theseproducts. The retail unit in country Y sells the product to final customers for $450,000. Zen is considering adjusting its transfer prices to reduce overall corporate tax liability.Required1. Assume that both country X and country Y have corporate income tax rates of 40% and that no specialtax treaties or benefits apply to Zen. What would be the effect on Zen’s total tax burden if the manufacturing unit raises its price from $300,000 to $360,000?2. What would be the effect on Zen’s total taxes if the manufacturing unit raised its price from $300,000 to$360,000 and the tax rates in countries X and Y are 20% and 40%, respectively?3. Comment on any ethical issues you observe in this casearrow_forwardDuncan Multinational Corporation is a global manufacturer and distributor of household appliances. It is basedin China, United States, Trinidad, and the United Kingdom. Sixty percent (60%) of supplies are sent to variouscompaniesthroughout the four countries. It also markets its supplies through social media and brand ambassadorand retail clients can make orders over the phone and they ship the supplies upon demand.The main competition for Duncan Multinational Corporation comes from one U.S. firm and one Canadianfirm. The U.S firm and Canadian firm have approximately 45% market share in Barbados, Guyana andJamaica. The marketing and transportation costs in these countries are very high.Section 1b) in 600 words, discuss a supply-related factor, that may influence exchange rate movements in Jamaica and Barbados. Include any possible government-related factors and be specific. (Tie your description tothe specific Duncan Multinational Corporation case background provided here).arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Relevant Costing Explained; Author: Kaplan UK;https://www.youtube.com/watch?v=hnsh3hlJAkI;License: Standard Youtube License