MANAGERIAL ACCOUNTING FUND. W/CONNECT
5th Edition
ISBN: 9781259688713
Author: Wild
Publisher: MCG
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Textbook Question
Chapter 9, Problem 10QS
Computing residual income A1
Refer to the information in QS 22-10. Assume a target income of 12% of average invested assets. Compute residual income for each division.
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Calculate residual income (RI) for each division using operating income as a measure of income and total assets minus current liabilities as a measure of investment.
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?
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 return
Chapter 9 Solutions
MANAGERIAL ACCOUNTING FUND. W/CONNECT
Ch. 9 - Prob. 1MCQCh. 9 - Prob. 2MCQCh. 9 - Prob. 3MCQCh. 9 - Prob. 4MCQCh. 9 - 5. Using the data in question 4, Department X’s...Ch. 9 - Prob. 1DQCh. 9 - Prob. 2DQCh. 9 - Prob. 3DQCh. 9 - Prob. 4DQCh. 9 - Prob. 5DQ
Ch. 9 - Prob. 6DQCh. 9 - Prob. 7DQCh. 9 - Prob. 8DQCh. 9 - Prob. 9DQCh. 9 - Prob. 10DQCh. 9 - Prob. 11DQCh. 9 - Prob. 12DQCh. 9 - Prob. 13DQCh. 9 - Prob. 14DQCh. 9 - Prob. 15DQCh. 9 - Prob. 16DQCh. 9 - Prob. 17DQCh. 9 - Prob. 18DQCh. 9 - Prob. 19DQCh. 9 - Prob. 20DQCh. 9 - Prob. 1QSCh. 9 - Prob. 2QSCh. 9 - Prob. 3QSCh. 9 - In each blank next to the following terms, place...Ch. 9 - Prob. 5QSCh. 9 - In each blank to the following terms, place the...Ch. 9 - Car Mart pays $130,000 rent ecah year for its...Ch. 9 - Prob. 8QSCh. 9 - Compute return on investment for each of the...Ch. 9 - Computing residual income A1 Refer to the...Ch. 9 - Prob. 11QSCh. 9 - Computing profit margin and investment turnover A2...Ch. 9 - Classify each the performance measures below into...Ch. 9 - Prob. 14QSCh. 9 - Prob. 15QSCh. 9 - Prob. 16QSCh. 9 - Prob. 17QSCh. 9 - Prob. 18QSCh. 9 - Prob. 19QSCh. 9 - Prob. 1ECh. 9 - Prob. 2ECh. 9 - Prob. 3ECh. 9 - Prob. 4ECh. 9 - Prob. 5ECh. 9 - Prob. 6ECh. 9 - Jansen Company reports the following for its ski...Ch. 9 - Prob. 8ECh. 9 - Prob. 9ECh. 9 - Prob. 10ECh. 9 - Prob. 11ECh. 9 - Prob. 12ECh. 9 - Prob. 13ECh. 9 - Prob. 14ECh. 9 - Exercise 22-16 Performance measures-balanced...Ch. 9 - Oakwood Company produces maple bookcases to...Ch. 9 - Best Ink produces ink-jet printers for personal...Ch. 9 - The trailer division of Baxter Bicycles makes bike...Ch. 9 - Prob. 19ECh. 9 - Prob. 20ECh. 9 - Prob. 21ECh. 9 - Prob. 1PSACh. 9 - National Bank has several departments that occupy...Ch. 9 - Prob. 3PSACh. 9 - Prob. 4PSACh. 9 - Prob. 5PSACh. 9 - Prob. 1PSBCh. 9 - Harmons has several departments that occupy all...Ch. 9 - Prob. 3PSBCh. 9 - Sadar Company operates a store with two...Ch. 9 - Prob. 5PSBCh. 9 - Santana Reys two departments, computer consulting...Ch. 9 - Prob. 1BTNCh. 9 - Prob. 2BTNCh. 9 - Prob. 3BTNCh. 9 - Prob. 4BTNCh. 9 - Prob. 5BTNCh. 9 - Prob. 6BTNCh. 9 - Brian Lintons company, United By Blue, sells...Ch. 9 - Prob. 8BTNCh. 9 - Prob. 9BTN
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- QS 9-14 (Algo) Components of performance measures LO A1, A2 Fill in the blanks in the schedule below for two separate investment centers A and B. Investment Center A B $ ? $ 382,200 $ 1,470,000 $ 11,100,000 $ ? $ ? Sales Income Average assets Profit margin 8% ?% Investment turnover 1.5 Return on investment ?% 12%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 degrees. Compute the residual income for each division.arrow_forwardWarren Company has two divisions with the following results: Sales revenue Ashland $ 447,000 267,000 Erie $1,170,000 $ 847,000 Divisional expenses Segment income $ 180,000 $ 347,000 $3,970,000 Average invested assets $1,170,000 Warren Company has a hurdle rate of 11.7%. a. Calculate the return on investment for each division. (Round your answers to 2 decimal places.) Return on investment Ashland % Erie % b. Break each division's return on investment down into its component parts using the DuPont method. (Round your profit margin to 2 decimal places and investment turnover to 3 decimal places.) Profit margin Investment Turnover % Ashland Erie %arrow_forward
- The Marine Division of Pacific Corp. has average invested assets of $120,000,000. Sales revenue of $50,210,000 results in an operating income of $9,964,000. The hurdle rate is 8%. a. Calculate the return on investment. (Round your answer to 2 decimal places.) Raun mant b. Calculate the profit margin. (Round your answer to 2 decimal places.) c. Calculate the investment turnover. (Round your answer to 4 decimal places.) Next >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_forward3. Based on segment margin and average assets, compute the profit margin4. Based on segment margin and average assets, compute the asset turnover5. Based on segment margin and average assets, compute the ROI.arrow_forward
- Condensed financial data are presented below for the Phoenix Corporation: Accounts receivable Inventory Total current assets Intangible assets Total assets Current liabilities Long-term liabilities Sales Cost of goods sold Interest expense Income tax expense Net income Cash flow from operations Cash flow from investing activities Cash flow from financing activities Tax rate 20X2 $ 267,500 312,500 670,000 50,000 825,000 695,000 252,500 - 200,000 77,500 75,000 1,640,000 982,500 10,000 77,500 127,500 71,000 (6,000) (62,500) 30% The profit margin used to calculate return on assets for 20X2 is (rounded): 20X1 $230,000 257,500 565,000 60,000arrow_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_forward3. If management desires a minimum acceptable return on investment of 10%, determine the residual income for each division.arrow_forward
- Investment Center Sales. Net income Average invested assets Profit margin Investment turnover Return on investment Profit Margin: Investment Center A B Investment Turnover: Investment Center A B Choose Numerator: Investment Center Use the information in the table above to compute each department's contribution to overhead (both in dollars and as a percent). (Round your final answers to 2 decimal places.) Return on investment: A B Choose Numerator: Choose Numerator: 1 A 1 $ $ 584,600 $1,580,000 ? 1 10% ? ?% B $12,200,000 $ $ 1 Choose Denominator: Choose Denominator: 1 Choose Denominator: ? ? ?% 1.3 13% = Profit Margin Profit margin 10.00 % % = Investment Turnover = Investment turnover 1.30 Return on investment = Return on investment % 13.00 %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_forwardThe operating income and the amount of invested assets in each division of Conley Industries are as follows: a. Compute the return on investment for each division. b. Which division is the most profitable per dollar invested? Based on the data in Exercise 10 assume that management has established a 15% minimum acceptable return for invested assets. a. Determine the residual income for each division. b. Which division has the most residual income?arrow_forward
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