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ACCOUNTING,CHAP.1-13
26th Edition
ISBN: 9781305088412
Author: WARREN
Publisher: CENGAGE L
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Question
Chapter 24, Problem 24.11EX
(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)
Residual income of for each division
(b)
To determine
The division with highest residual income
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Students have asked these similar questions
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 performance of the manager of Division A is measured by residual
income. Which of the following would increase the manager's performance
measure?
a. Increase in average operating assets.
b. Decrease in average operating assets.
c. Increase in minimum required return.
d. Decrease in net operating income.
Chapter 24 Solutions
ACCOUNTING,CHAP.1-13
Ch. 24 - Differentiate between centralized and...Ch. 24 - Differentiate between a profit center and an...Ch. 24 - Prob. 3DQCh. 24 - What is the major shortcoming of using income from...Ch. 24 - In a decentralized company in which the divisions...Ch. 24 - How does using the return on investment facilitate...Ch. 24 - Why would a firm use a balanced scorecard in...Ch. 24 - What is the objective of transfer pricing?Ch. 24 - When is the negotiated price approach preferred...Ch. 24 - When using the negotiated price approach to...
Ch. 24 - Budgetary performance for cost center Caroline...Ch. 24 - Budgetary performance for cost center Conley...Ch. 24 - Prob. 24.2APECh. 24 - Prob. 24.2BPECh. 24 - Prob. 24.3APECh. 24 - Prob. 24.3BPECh. 24 - Profit margin, investment turnover, and ROI Cash...Ch. 24 - Profit margin, investment turnover and ROI Briggs...Ch. 24 - Prob. 24.5APECh. 24 - Residual income The Commercial Division of Herring...Ch. 24 - Transfer pricing The materials used by the North...Ch. 24 - Transfer pricing The materials used by the...Ch. 24 - Budget performance reports for cost centers...Ch. 24 - Prob. 24.2EXCh. 24 - Prob. 24.3EXCh. 24 - Prob. 24.4EXCh. 24 - Service department charges In divisional income...Ch. 24 - Service department charges and activity bases...Ch. 24 - Divisional income statements with service...Ch. 24 - Prob. 24.8EXCh. 24 - Profit center responsibility reporting XSport...Ch. 24 - Rate of return on investment The income from...Ch. 24 - Prob. 24.11EXCh. 24 - Determining missing items in return computation...Ch. 24 - Profit margin, investment turnover, and rate of...Ch. 24 - Prob. 24.14EXCh. 24 - Determining missing items in return and residual...Ch. 24 - Determining missing items from computations Data...Ch. 24 - Prob. 24.17EXCh. 24 - Balanced scorecard for a service company American...Ch. 24 - Building a balanced scorecard Hit-n-Kun Inc. owns...Ch. 24 - Decision on transfer pricing Materials used by the...Ch. 24 - Prob. 24.21EXCh. 24 - Budget performance report for a cost center...Ch. 24 - Prob. 24.2APRCh. 24 - Prob. 24.3APRCh. 24 - Effect of proposals on divisional performance A...Ch. 24 - Divisional performance analysis and evaluation The...Ch. 24 - Prob. 24.6APRCh. 24 - Budget performance report for a cost center The...Ch. 24 - Prob. 24.2BPRCh. 24 - Prob. 24.3BPRCh. 24 - Effect of proposals on divisional performance A...Ch. 24 - Divisional performance analysis and evaluation The...Ch. 24 - Prob. 24.6BPRCh. 24 - Prob. 24.1CPCh. 24 - Prob. 24.2CPCh. 24 - Evaluating divisional performance The three...Ch. 24 - Prob. 24.4CPCh. 24 - Evaluating division performance Last Resort...
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- The following selected data pertain to the Argent Division for last year: Required: 1. How much is the residual income? 2. How much is the return on investment? (Rounded to four significant digits.)arrow_forwardThe residual income approach to measuring divisional performance measurement is closely related to the ____________ method of performance measurement. Select one: a. Internal rate of return b. Payback period c. Return on capital employed d. Accounting rate of return e. Economic value addedarrow_forwardThe vice president of operations of Moab Bike Company is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed income statement data for the past year ending October 31, 20Y9, for each division are as follows: (P14-5) Touring Bike Division Trail Bike Division Sales $1,500,000 $5,00 Cost of goods sold Operating expenses Invested assets 900,000 4,000,000 495,000 968,000 750,000 3,600,000 Instructions 1. Prepare condensed divisional income statements for the year ended October 31, 20Y9, assuming that there were no service department charges. Touting Bike Division Trial Bike Divisionarrow_forward
- Select the best answer from the five listed below to fill in the blank The residual income approach to measuring divisional performance measurement is closely related to the method of performance measurement. O a. payback period O b. economic value added O c. return on capital employed O d. internal rate of return O e. accounting rate of returnarrow_forward3. If management desires a minimum acceptable return on investment of 10%, determine the residual income for each division.arrow_forwardUse the following information for Exercises 11-31 and 11-32: Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last years results: Washingtons actual cost of capital was 12%. Exercise 11-32 Residual Income Refer to the information for Washington Company above. In addition, Washington Companys top management has set a minimum acceptable rate of return equal to 8%. Required: 1. Calculate the residual income for the Adams Division. 2. Calculate the residual income for the Jefferson Division.arrow_forward
- Required: 1. Compute the ROI for each division. 2. Assume that the company evaluates performance by use of residual income and that the minimum required return for any division is 16 degrees. Compute the residual income for each division.arrow_forwardRequired: 1. Compute the ROI for each division. 2. Assume that the company evaluates performance by use of residual income and that the minimum required return for any division is 16%. Compute the residual income for each division.arrow_forwardrequired: (a) Calculate the current ROI for Division M. (percent) (b) Calculate the current Residual for Division M. (c) What is the new ROI if Proposal 1 is selected? (with 2 decimal, percent) (d) What is the new Residual income if Proposal 1 is selected? (e) What is the new Residual income if Proposal 2 is selected?arrow_forward
- Refer to the data given in Exercise 10.8. Required: 1. Compute the residual income for each of the opportunities. (Round to the nearest dollar.) 2. Compute the divisional residual income (rounded to the nearest dollar) for each of the following four alternatives: a. The Espresso-Pro is added. b. The Mini-Prep is added. c. Both investments are added. d. Neither investment is made; the status quo is maintained. Assuming that divisional managers are evaluated and rewarded on the basis of residual income, which alternative do you think the divisional manager will choose? 3. Based on your answer in Requirement 2, compute the profit or loss from the divisional managers investment decision. Was the correct decision made?arrow_forwardResidual income is: A. The excess of operating income over the minimum operating income required B. The same as operating income C. The excess of the minimum operating income required over operating income on the income statement D. Operating income multiplied by the desired ROIarrow_forwardDeuk Seon have the following investment centers. Several items are missing from the following table of rate of return on investment and residual income. Determine the missing items, identifying each item by the appropriate letter. Department Invested Assets Income from Operations Rate of Return on Investment Min. Rate of Return Min. Amt. of Income from Operations Residual Income Taek (a) (b) (c) 16% P128,000 P10,000 Jung Hwan P850,000 P153,000 (d) 12% (e) (f) Sun woo P825,000 (g) 20% (h) (i) P24,000 Dong Ryong (j) P129,000 24% (k) P60,000 (l) (a) Determine the missing items, identifying each by number. (b) Which division is most profitable in terms of income from operations? (c) Which division is most profitable in terms of rate of return on investment?arrow_forward
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