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Communication
The Norse Division of Gridiron Concepts Inc. experienced significant revenue and profit growth from 20Y4 to 20Y6 as shown in the following divisional income statements:
Gridiron Concepts Inc. Divisional Income Statements, Norse Division For the Three Years Ended December 31, 20Y6 |
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20Y4 | 20Y5 | 20Y6 | |
Sales | $1,470,000 | $2,100,000 | $2,450,000 |
Cost of goods sold | 1,064,000 | 1,498,000 | 1,680,000 |
Gross profit | $ 406,000 | $ 602,000 | $ 770,000 |
Operating expenses | 185,500 | 224,000 | 231,000 |
Income from operations | $ 220,500 | $ 378,000 | $ 539,000 |
Invested assets | $ 735,000 | $ 1,500,000 | $3,500,000 |
There are no service department charges, and the division operates as an investment center that must maintain a 15% return on invested assets.
Determine the profit margin, investment turnover, and
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Chapter 9 Solutions
Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
- Profit Center Responsibility Reporting XSport Sporting Goods Co. operates two divisions—the Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of December 31, 20Y9, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted: Sales—Winter Sports Division $34,650,000 Sales—Summer Sports Division 38,280,000 Cost of Goods Sold—Winter Sports Division 20,790,000 Cost of Goods Sold—Summer Sports Division 22,110,000 Sales Expense—Winter Sports Division 5,940,000 Sales Expense—Summer Sports Division 5,280,000 Administrative Expense—Winter Sports Division 3,465,000 Administrative Expense—Summer Sports Division 3,399,000 Advertising Expense 946,000 Transportation Expense 476,800 Accounts Receivable Collection Expense 228,800 Warehouse Expense 3,300,000 The bases to be used in allocating expenses, together with other essential…arrow_forwardProfit Center Responsibility Reporting A-One Freight Inc. has three regional divisions organized as profit centers. The chief executive officer (CEO) evaluates divisional performance using operating income as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31, 20Y3. Revenues—Air Division $ 1,086,300 Revenues—Rail Division 1,307,900 Revenues—Truck Division 2,315,700 Operating Expenses—Air Division 688,400 Operating Expenses—Rail Division 778,400 Operating Expenses—Truck Division 1,400,400 Corporate Expenses—Shareholder Relations 165,200 Corporate Expenses—Customer Support 546,000 Corporate Expenses—Legal 262,400 General Corporate Officers’ Salaries 364,900 The company operates three service departments: Shareholder Relations, Customer Support, and Legal. The Shareholder Relations Department conducts a variety of services for shareholders of the company. The Customer Support Department…arrow_forwardeBook Profit Center Responsibility Reporting Carry On Freight Inc. has three regional divisions organized as profit centers. The chief executive officer (CEO) evaluates divisional performance using operating income as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31, 20Y3. Revenues—Air Division $ 1,226,300 Revenues—Rail Division 1,443,700 Revenues—Truck Division 2,576,000 Operating Expenses—Air Division 777,100 Operating Expenses—Rail Division 859,200 Operating Expenses—Truck Division 1,557,800 Corporate Expenses—Shareholder Relations 186,500 Corporate Expenses—Customer Support 678,000 Corporate Expenses—Legal 222,300 General Corporate Officers' Salaries 411,900 The company operates three service departments: Shareholder Relations, Customer Support, and Legal. The Shareholder Relations Department conducts a variety of services for shareholders of the company. The Customer…arrow_forward
- Profit Center Responsibility Reporting XSport Sporting Goods Co. operates two divisions—the Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of December 31, 20Y9, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted: Sales—Winter Sports Division $26,775,000 Sales—Summer Sports Division 29,580,000 Cost of Goods Sold—Winter Sports Division 16,065,000 Cost of Goods Sold—Summer Sports Division 17,085,000 Sales Expense—Winter Sports Division 4,590,000 Sales Expense—Summer Sports Division 4,080,000 Administrative Expense—Winter Sports Division 2,677,500 Administrative Expense—Summer Sports Division 2,626,500 Advertising Expense 927,000 Transportation Expense 408,800 Accounts Receivable Collection Expense 224,000 Warehouse Expense 2,550,000 The bases to be used in allocating expenses, together with other essential…arrow_forwardProfit Center Responsibility Reporting Championship Sports Inc. operates two divisions—the Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of December 31, 20Y9, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted: Sales—Winter Sports Division $8,900,000 Sales—Summer Sports Division 16,400,000 Cost of Goods Sold—Winter Sports Division 5,000,000 Cost of Goods Sold—Summer Sports Division 9,000,000 Sales Expense—Winter Sports Division 650,000 Sales Expense—Summer Sports Division 1,200,000 Administrative Expense—Winter Sports Division 800,000 Administrative Expense—Summer Sports Division 1,450,000 Advertising Expense 1,090,000 Transportation Expense 192,000 Accounts Receivable Collection Expense 68,000 Warehouse Expense 1,800,000 The bases to be used in allocating expenses, together with other information, are as…arrow_forwardSales revenue Orange Corporation has two divisions: Fruit and Flower. The following information for the past year is available for each division: Fruit Division $ 1,320,000 990,000 $ 330,000 $ 5,000,000 Flower Division $1,980,000 1,485,000 $ 495,000 $ 1,980,000 Cost of goods sold and operating expenses Net operating income Average invested assets Orange has established a hurdle rate of 5 percent. Required: 1-a. Compute each division's return on investment (ROI) and residual income for last year. 1-b. Determine which manager seems to be performing better. 2. Suppose Orange is investing in new technology that will increase each division's operating income by $142,000. The total Investment required is $2,100,000, which will be split evenly between the two divisions. Calculate the ROI and residual income for each division after the investment is made. 3. Determine whether both managers will support the investment.arrow_forward
- Profit center responsibility reporting for a service company Red Line Railroad Inc. has three regional divisions organized as profit centers. The chief executive officer (CEO) evaluates divisional performance, using operating income as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31: Revenues—East $1,400,000 Revenues—West 2,000,000 Revenues—Central 3,200,000 Operating Expenses—East 800,000 Operating Expenses—West 1,350,000 Operating Expenses—Central 1,900,000 Corporate Expenses—Shareholder Relations 300,000 Corporate Expenses—Customer Support 320,000 Corporate Expenses—Legal 500,000 General Corporate Officers' Salaries 1,200,000 The company operates three support departments: Shareholder Relations, Customer Support, and Legal. The Shareholder Relations Department conducts a variety of services for shareholders of the company. The Customer Support Department is the company’s point…arrow_forwardProfit center responsibility reporting for a service company Red Line Railroad Inc. has three regional divisions organized as profit centers. The chief executive officer (CEO) evaluates divisional performance, using operating income as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31: Revenues—East $1,400,000 Revenues—West 2,000,000 Revenues—Central 3,200,000 Operating Expenses—East 800,000 Operating Expenses—West 1,350,000 Operating Expenses—Central 1,900,000 Corporate Expenses—Shareholder Relations 300,000 Corporate Expenses—Customer Support 320,000 Corporate Expenses—Legal 500,000 General Corporate Officers' Salaries 1,200,000 The company operates three support departments: Shareholder Relations, Customer Support, and Legal. The Shareholder Relations Department conducts a variety of services for shareholders of the company. The Customer…arrow_forwardProfit center responsibility reporting for a service company Red Line Railroad Inc. has three regional divisions organized as profit centers. The chief executive officer (CKO) evaluates divisional performance, using income from operations as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of december 31 Revenues -East $1,400,000 Revenues-East 2,000,000 Revenues-central 3,200,000 Operating Expenses- East 800,000 operating expenses-west 1.350,000 Operating Expenses - Central 1,900,000 Operating Expenses- shareholder relations 300,000 Corporate Expenses - Customer Support 320,000 Corporate Expenses Legal 500,000 General Corporate Officer's Salaries 1,200,000 The company operates three service departments: Shareholder Relation, Customer Support and Legal The shareholder Relations, Customer Support, and Legal. The shareholder relations department conducts a variety of services for shareholders of…arrow_forward
- Profit Center Responsibility Reporting for a Service Company Thomas Railroad Company organizes its three divisions, the North (N), South (S), and West (W) regions, as profit centers. The chief executive officer (CEO) evaluates divisional performance, using income from operations as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31: Revenues—N Region $1,030,800 Revenues—S Region 1,192,300 Revenues—W Region 2,190,000 Operating Expenses—N Region 653,200 Operating Expenses—S Region 709,600 Operating Expenses—W Region 1,324,400 Corporate Expenses—Dispatching 567,500 Corporate Expenses—Equipment Management 188,600 Corporate Expenses—Treasurer’s 156,800 General Corporate Officers’ Salaries 346,200 The company operates three service departments: the Dispatching Department, the Equipment Management Department, and the Treasurer’s Department. The Dispatching Department manages the scheduling…arrow_forwardCorrections to Service Department Charges for a Service Company Wild Sun Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared: Wild Sun Airlines Inc.Divisional Income StatementsFor the Year Ended December 31, 20Y9 Passenger Division Cargo Division Revenues $3,025,000 $3,025,000 Operating expenses 2,450,000 2,736,000 Income from operations beforeservice department charges $575,000 $289,000 Less service department charges: Training $125,000 $125,000 Flight scheduling 108,000 108,000 Reservations 151,200 384,200 151,200 384,200 Income from operations $190,800 $(95,200) The service department charge rate for the service department costs was based on revenues. Because the revenues of the two divisions were the same, the service department charges to each division were also the same. The following additional…arrow_forwardProfit Center Responsibility Reporting XSport Sporting Goods Co. operates two divisions—the Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of December 31, 20Y9, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted: Sales—Winter Sports Division $29,295,000 Sales—Summer Sports Division 32,364,000 Cost of Goods Sold—Winter Sports Division 17,577,000 Cost of Goods Sold—Summer Sports Division 18,693,000 Sales Expense—Winter Sports Division 5,022,000 Sales Expense—Summer Sports Division 4,464,000 Administrative Expense—Winter Sports Division 2,929,500 Administrative Expense—Summer Sports Division 2,873,700 Advertising Expense 1,012,000 Transportation Expense 435,000 Accounts Receivable Collection Expense 250,200 Warehouse Expense 2,790,000 The bases to be used in allocating expenses, together with other essential…arrow_forward
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