Please send answer in chart set up Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center).
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Please send answer in chart set up
Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center).
Investment Center | Sales | Income | Average Invested Assets |
||||||
Electronics | $ | 39,840,000 | $ | 2,988,000 | $ | 16,600,000 | |||
Sporting goods | 25,200,000 | 2,142,000 | 12,600,000 | ||||||
1. Compute
2. Assume a target income level of 11% of average invested assets. Compute residual income for each department. Which department generated the most residual income for the company?
3. Assume the Electronics department is presented with a new investment opportunity that will yield a 15% return on investment. Should the new investment opportunity be accepted?
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- Instructions: Designate the best answer for each of the following questions. 1.Which of the following is a responsibility center that incurs expenses, generates revenues, and is responsible for generating a return on assets? a. Cost center b. Revenue center c. Profit center d. Investment center 2.Which one of the following is the most useful measure for evaluating a manager's performance in controlling revenues and costs in a profit center? a. Contribution margin b. Contribution net income c. Contribution gross profit d. Controllable margin 3.Hanover Corporation desires to earn target net income of $42,000. The selling price per unit is $18, unit variable cost is $5.60, and total fixed costs are $123,912. How many units must the company sell to earn its target net income? a. 13,380 b. 9,993 c. 3,387 d. 9,217 4.Remark…As manager of department B in MarIeys Manufacturing, based on the costs you identified in the previous exercise for further research, how does this impact the financial performance of your department, and what might be some questions you want to ask or solutions you might propose to Marleys management?Explain the benefits of a return on investment structure within an investment center framework. It may help to think of an example using an existing company.
- Use the following information to answer the questions that follow. A. Calculate the operating income percentage for each of the courses. Comment on how your analysis has changed for each course. B. Perform a vertical analysis for each course. Based on your analysis, what accounts would you want to investigate further? How might management utilize this information? C. Which method of analysis (using a dollar value or percentage) is most relevant and/or useful? ExplainConcepts and Terminology From the choices presented in parentheses, choose the appropriate term for completing each of the following sentences: Sentence Appropriate term for completing sentence a. Advertising costs are usually viewed as (period, product) costs. b. Feedback is often used to (improve, direct) operations. c. Payments of cash or the commitment to pay cash in the future for the purpose of generating revenues are (costs, expenses). d. A product, a sales territory, a department, or an activity to which costs are traced is called a (direct cost, cost object). e. The balance sheet of a manufacturer would include an account for (cost of goods sold, work in process inventory). f. Factory overhead costs combined with direct labor costs are called (prime, conversion) costs. g. The implementation of automatic, robotic factory equipment normally (increases, decreases) the direct labor component of product costs.Discuss how using the rate of return on investment (ROI), as an evaluation tool, helps facilitate comparabilitybetween the various departments or divisions of a business?
- Concepts and Terminology From the choices presented in parentheses, choose the appropriate term for completing each of the following sentences: Appropriate term for Sentence completing sentence a. Advertising costs are usually viewed as (period, product) costs. b. Feedback is often used to (improve, direct) operations. c. Payments of cash or the commitment to pay cash in the future for the purpose of generating revenues are (costs, expenses). d. A product, a sales territory, a department, or an activity to which costs are traced is called a (direct cost, cost object). e. The balance sheet of a manufacturer would include an account for (cost of goods sold, work in process inventory). f. Factory overhead costs combined with direct labor costs are called (prime, conversion) costs. g. The implementation of automatic, robotic factory equipment normally (increases, decreases) the direct labor component of product costs.Select all of the formulas below that will correctly get you the Return on Investment. Operating Income / Total Assets Sales Margin * Capital Turnover (Operating Income / Sales Revenue) (Sales Revenue / Total Assets) Operating Income - (Target Rate of Return * Total Assets) -DO Which of the following promotes goal congruence (aligned goals between segment managers and top management)? Return on Investment as a performance evaluation measure Residual Income as a performance evaluation measureReferring to the dimensions and applicable Return on Investment aspects (ROI) listed below: Provide a simple description of how the concepts and principles would apply in a practical work environment to improve work results,1. Financial impact2. Human development impact3. Innovation output4. Technology alignment5. Alignment with company strategy
- Q.What information, in addition to that provided in the income statements, would you want Brown to gather, if you wanted to improve operational efficiency?Mastery Problem: Return on Investment, margin, and turnover Return on Investment (ROI) The manager of an investment center should be evaluated based on revenues, costs, and investments. An evaluation based on net income ignores the amount of investment the investment center required. One way to measure operating profit in relation to investment is a calculation called the return on investment. One formula for calculating return on investment is: Operating income Invested Assets ROI is effective because it takes into consideration the three factors under the control of an investment center manager: revenues, costs, and investments. ROI measures the income (or return) earned on each dollar of investment. APPLY THE CONCEPTS: Calculating return on investment The divisional income statements for three divisions of the McLaren Company are shown. McLaren Company Divisional Income Statements For the Year Ending December 31, 2012 Division A Division B Division C…Instruction: Choose the letter that corresponds to the correct answer for each question. 1. Indicate which factors affect the length of the operating cycle? A Management efficiency, industry averages, and borrowing Terms of trade, profitability, and borrowing B C Industry norms, market share and profitability D Terms of trade, management efficiency and industry norms