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Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following Information is from Lauderdale's first year of operations: Revenues Cost of sales Selling, General and Administrative (all fixed) Corporate overhead Region I $ 1,217,000 458,500 Region II $ 1,667,000 818,500 445,500 655,500 Region III $ 2,267,000 1,148,500 875,500 Total Corporation $ 5,151,000 2,425,500 1,976,500 466,000 Information on the division assets in the three regions of Lauderdale Corporation follows: Region I Region II Region III $ 717,000 647,000 1,313,000 Lauderdale Corporation has a cost of capital of 8.6 percent. The Individual regions are responsible for research and development (R&D) decisions and for current liabilities. Information on R&D expenditures (which are Included In SG&A) for the year and current liabilities for the three regions follows: R&D expenditures Current liabilities Region I $ 184,000 124,000 Region II $ 244,000 174,000 Region III $ 484,000 224,000 R&D expenditures are assumed to be incurred uniformly over the period and are expected to generate benefits for three years. Required: a. Compute economic value added for the three regions. Ignore taxes. b. How have these regions performed? Complete this question by entering your answers in the tabs below. Required A Required B Compute economic value added for the three regions. Ignore taxes. Note: Do not round your intermediate calculations. Round your answers to the nearest whole dollar amount. Region I Economic value added $ (1,810) $ Region II 109,281 Region III 2,267

Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following Information is from Lauderdale's first year of operations: Revenues Cost of sales Selling, General and Administrative (all fixed) Corporate overhead Region I $ 1,217,000 458,500 Region II $ 1,667,000 818,500 445,500 655,500 Region III $ 2,267,000 1,148,500 875,500 Total Corporation $ 5,151,000 2,425,500 1,976,500 466,000 Information on the division assets in the three regions of Lauderdale Corporation follows: Region I Region II Region III $ 717,000 647,000 1,313,000 Lauderdale Corporation has a cost of capital of 8.6 percent. The Individual regions are responsible for research and development (R&D) decisions and for current liabilities. Information on R&D expenditures (which are Included In SG&A) for the year and current liabilities for the three regions follows: R&D expenditures Current liabilities Region I $ 184,000 124,000 Region II $ 244,000 174,000 Region III $ 484,000 224,000 R&D expenditures are assumed to be incurred uniformly over the period and are expected to generate benefits for three years. Required: a. Compute economic value added for the three regions. Ignore taxes. b. How have these regions performed? Complete this question by entering your answers in the tabs below. Required A Required B Compute economic value added for the three regions. Ignore taxes. Note: Do not round your intermediate calculations. Round your answers to the nearest whole dollar amount. Region I Economic value added $ (1,810) $ Region II 109,281 Region III 2,267

Financial And Managerial Accounting
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter24: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 8E: Rocky Mountain Airlines Inc. has two divisions organized as profit centers, the Passenger Division...
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Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following Information is from Lauderdale's first year of operations: Revenues Cost of sales Selling, General and Administrative (all fixed) Corporate overhead Region I $ 1,217,000 458,500 Region II $ 1,667,000 818,500 445,500 655,500 Region III $ 2,267,000 1,148,500 875,500 Total Corporation $ 5,151,000 2,425,500 1,976,500 466,000 Information on the division assets in the three regions of Lauderdale Corporation follows: Region I Region II Region III $ 717,000 647,000 1,313,000 Lauderdale Corporation has a cost of capital of 8.6 percent. The Individual regions are responsible for research and development (R&D) decisions and for current liabilities. Information on R&D expenditures (which are Included In SG&A) for the year and current liabilities for the three regions follows: R&D expenditures Current liabilities Region I $ 184,000 124,000 Region II $ 244,000 174,000 Region III $ 484,000 224,000 R&D expenditures are assumed to be incurred uniformly over the period and are expected to generate benefits for three years. Required: a. Compute economic value added for the three regions. Ignore taxes. b. How have these regions performed? Complete this question by entering your answers in the tabs below. Required A Required B Compute economic value added for the three regions. Ignore taxes. Note: Do not round your intermediate calculations. Round your answers to the nearest whole dollar amount. Region I Economic value added $ (1,810) $ Region II 109,281 Region III 2,267
Transcribed Image Text:Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following Information is from Lauderdale's first year of operations: Revenues Cost of sales Selling, General and Administrative (all fixed) Corporate overhead Region I $ 1,217,000 458,500 Region II $ 1,667,000 818,500 445,500 655,500 Region III $ 2,267,000 1,148,500 875,500 Total Corporation $ 5,151,000 2,425,500 1,976,500 466,000 Information on the division assets in the three regions of Lauderdale Corporation follows: Region I Region II Region III $ 717,000 647,000 1,313,000 Lauderdale Corporation has a cost of capital of 8.6 percent. The Individual regions are responsible for research and development (R&D) decisions and for current liabilities. Information on R&D expenditures (which are Included In SG&A) for the year and current liabilities for the three regions follows: R&D expenditures Current liabilities Region I $ 184,000 124,000 Region II $ 244,000 174,000 Region III $ 484,000 224,000 R&D expenditures are assumed to be incurred uniformly over the period and are expected to generate benefits for three years. Required: a. Compute economic value added for the three regions. Ignore taxes. b. How have these regions performed? Complete this question by entering your answers in the tabs below. Required A Required B Compute economic value added for the three regions. Ignore taxes. Note: Do not round your intermediate calculations. Round your answers to the nearest whole dollar amount. Region I Economic value added $ (1,810) $ Region II 109,281 Region III 2,267
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