The following results are available for Division X and Y: Division X Division Y Profit before interest and tax P185 000 P172, 000 Capital employed P1, 540, 000 P1, 650, 000 The cost of capital is 10%. Calculate and comment on the performance of the departments based on: a. Return on capital employed b. Residual income

The following results are available for Division X and Y: Division X Division Y Profit before interest and tax P185 000 P172, 000 Capital employed P1, 540, 000 P1, 650, 000 The cost of capital is 10%. Calculate and comment on the performance of the departments based on: a. Return on capital employed b. Residual income

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter11: Performance Evaluation And Decentralization

Section: Chapter Questions

Problem 32E: Use the following information for Exercises 11-31 and 11-32: Washington Company has two divisions:...

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The following results are available for Division X and Y:Division X Division YProfit before interest and tax P185 000 P172, 000Capital employed P1, 540, 000 P1, 650, 000The cost of capital is 10%.Calculate and comment on the performance of the departments based on:a. Return on capital employed (4 marks)b. Residual incom
The following are available for divison X and Y Profit before interest and tax X 185 000 Y172 000 Capital employed X 1 540 000 Y 1 650 000 The cost of capital is 10% comment on the performance of the departments based on a. Return on capital employed b.residual income
7. Jordan Company has two divisions, which reported the following results for the most recent year. Division I Division II Income ₱ 02,700,000 ₱ 00,600,000 Average invested capital ₱ 18,000,000 ₱ 03,000,000 ROI 15% 20% Imputed interest rate = 10% Under residual income, which division is considered to have a better performance? Show solution Group of answer choices Neither Division I nor II Cannot be determined Division I Division II
Use 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.
Burwell Manufacturing is organized into two divisions (Agriculture and Mining) and a corporate headquarters. The financial group of the corporate staff prepared financial operating plans (budgets) for the two divisions for the upcoming year (year 1). Selected information from the plans is as follows: Employees (full-time equivalent, or FTE) Revenues ($000) Direct division costs ($000) Operating profit before allocation ($000) Agriculture 23 $ 6,360 3,400 $ 2,960 Corporate overhead costs are expected to be $4.2 million in year 1. Of the $4.2 million, $1.95 million is fixed and the remainder is variable. Two-thirds of the variable cost is variable with respect to revenue. The other third is variable with respect to the number of full-time equivalent (FTE) employees. Division managers are evaluated and compensated in part on division operating profit (including any allocated corporate costs) relative to the budget. Corporate overhead at Burwell is allocated based on relative revenues to…
Q23 Selected data from Box Division's accounting records revealed the following: Sales $ 345,060 Average investment $ 200,100 Net operating income $ 24,300 Minimum rate of return (divisional cost of capital) 11% Box Division's return on sales (ROS) is: (Round your percentages to one decimal place.) Multiple Choice 11.1%. 4.1%. 7.0%. 19.2%. 12.1%.
Calculator Data for Divisions A, B, C, D, and E are as follows: a. Determine the missing items. Round rate of return on investment, profit margin, and investment turnover answers to one decimal place when required. Div. Sales Income from Operations Inv. Assets Rate of Return on Inv. Profit Margin Invest. Turnover A $ $35,000 $200,000 % % 1.6 B $455,000 $ $284,375 16% % C $525,000 $73,500 $ % % 1.2 D $800,000 $ $ % 13.0% 2.5 E $ $ $250,000 % 16.0% 2.0 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?
The following data pertain to Dakota Division's most recent year of operations. Income $ 4,350,000 50,000,000 17,500,000 Sales revenue Average invested capital Required: Compute Dakota Division's sales margin, capital turnover, and return on investment for the year. (Round your answers to 2 decimal places (i.e., .1234 should be entered as 12.34).) Sales margin % Capital turnover Return on investment % < Prev 3 of 7 Next
Required information Use the following information for the Problems below: The following data pertain to three divisions of Nevada Aggregates, Incorporated. The company's required rate o on invested capital is 8 percent. Sales revenue Income Average investment Sales margin Capital turnover ROI Residual income Sales revenue Income Average investment Sales margin Capital turnover ROI Residual income Division A ? $ 440,000 ? 40% 2 ? ? Division A $ 8,150,000 $ 1,630,000 $ 8,150,000 20 % 1.00 $ 978,000 20% Required: The following data pertain to three divisions of Nevada Aggregates, Incorporated. The company's required rate of return capital is 8 percent. Note: Round "Capital turnover" answers to 2 decimal places. $ $ $ Division B $ 10,000,000 $ 2,160,000 $ 2,600,000 $ Division B 40,300,000 8,866,000 10,075,000 22 % 4.00 88 % ? ? ? 8,060,000 Division C ? $ ? ? 45% ? 40% $ 139,000 Division C 25 % 20 % 471,000
Simple ROI and Residual Income Calculations. Consider the following data: 1.) DIVISION X Y Z Invested Capital P2,000,000 (1)1,300,000 P1,250,000 Income (2) 100,000 P182,000 P 150,000 Revenue P4,000,000 P3,640,000 (3) 3,750,000 Income Percentage of Revenue 2.5% (4) 5% (5) 4% Capital Turnover (6) 2 (7) 2.8 3 Rate of Return on Invested Capital (8) 5% 14% (9) 12% Required: 1. Which division is the best performer 2. Suppose each division is assessed an imputed interest rate of 20% on invested capital. Compute the residual income for each division.
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%
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 %