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survey of accounting

Questions and Answers of Survey of Accounting

=+vPlant Manager: I just received this factory report for the latest month of operation. I’m not very pleased with these figures. Before these numbers go to headquarters, you and I will need to
=+Plant Manager: What’s the problem? Well, everything. Look at the variance. It’s too large. IfI understand the accounting approach being used here, you are assuming that my costs are variable to
=+If you were in the controllers position, how would you respond to the plant manager?
=+Read about the balanced scorecard at The Palladium Group Web site by clicking on “Strat¬egy” and then clicking on “Balanced Scorecards.” Prepare a briefreport describing the balanced
=+A14-6 The balanced scorecard and EVA GROUP Divide responsibilities between two groups, with one group going to the home page of The Palladium Group at http://www.thepalladiumgroup.com, and the
=+5. Can you suggest an alternative performance measure for motivating division managers to accept new investment opportunities that would increase the overall company income and rate ofreturn on
=+4. Why might the manager ofthe Outdoor Division decide to reject the new product line?Support your answer by determining the projected rate ofreturn on investment for 2008, assuming that the new
=+3. Determine the estimated rate ofreturn on investment for the new product line. Round whole percents to one decimal place.
=+2. Determine the Outdoor Division managers bonus for the past year
=+1. Determine the rate ofreturn on investment for the Outdoor Division for the past year.
=+The president is concerned that the manager ofthe Outdoor Division rejected the addition ofthe new product line, when all estimates indicated that the product line would be profit¬able and would
=+The Outdoor Division currently has $20,000,000 in invested assets, and Casual Living Furniture Inc.’s overall rate ofreturn on investment, including all divisions, is 8%. Each divi¬sion manager
=+The manager ofthe Outdoor Division was recently presented with the opportunity to add an additional product line, which would require invested assets of $11,000,000. A projected income statement
=+Income Statement For the Year Ended December 31, 2007 Sales Cost of goods sold Gross profit Operating expenses Income from operations$12,800,000 8,080,000$ 4,720,000 1,520,000$ 3,200,000
=+A14-5 Evaluating division performance Casual Living Furniture Inc. is a privately held diversified company with five separate divisions organized as investment centers. A condensed income statement
=+4. Evaluate the division’s performance over the 2006-2008 time period. Why was Billy con¬cerned about the performance?
=+3. Compute the rate ofreturn on investment for the Truck Division for 2006-2008.
=+2. Compute the investment turnover for the Truck Division for 2006-2008.
=+Terry: You are right. I’ve needed the assets in order to upgrade our technologies and expand our operations. The additional assets are one reason we have been able to grow and improve our profit
=+Terry: What do you mean? Look at our results. Our income from operations has nearly tripled, while our profit margins are improving.Billy: I am looking at your results. However, your income
=+Assume that there are no charges from service departments. The vice president ofthe divi¬sion, Terry Clark, is proud of his divisions performance over the last three years. The president of Yang
=+A14-4 Evaluating division performance over time The Truck Division of Yang Motors Inc. has been experiencing revenue and profit growth dur¬ing the years 2006-2008. The divisional income statements
=+3. Can you identify opportunities for improving the company’s financial performance?
=+2. Assuming that the minimum acceptable rate ofreturn on new projects is 12%, would all investments that produce a return in excess of 12% be accepted by the divisions?
=+1. Which division is making the best use of invested assets and thus should be given priority for future capital investments?
=+A14-3 Evaluating divisional performance The three divisions ofMonster Foods are Snack Goods, Cereal, and Frozen Foods. The divisions are structured as investment centers. The following
=+A14-2 The Customer Service Department of Grand Lakes Technologies asked the Publications DepartService department charges ment to prepare a brochure for its training program. The Publications
=+Michael: Fair or not, I think we’ll pass. Sorry we couldn’t have helped.Was Michael behaving ethically by trying to force the Semiconductor Division into a price break? Comment on Lynn’s
=+Lynn: You’ve got that right. Were producing and selling at about 80% of our capacity to outsid¬ers. Last year we were selling 100% of capacity. Would it be possible for your division to pick up
=+A14-1 Ethics and professional conduct in business ETHICS Micro Tech Company has two divisions, the Semiconductor Division and the PC Division. The PC Division may purchase semiconductors from the
=+b. Assuming that the managers ofthe two divisions cannot agree on a transfer price, what price would you suggest as the transfer price?
=+5.a. What is the range of possible negotiated transfer prices that would be acceptable for Goho Manufacturing Company?
=+4. If a transfer price of $880 per unit is negotiated, how much would the income from opera¬tions of each division and total company income from operations increase?
=+3. Prepare condensed divisional income statements for Goho Manufacturing Company, based on the data in part (2).
=+2. Ifthe Navigational Systems Division purchases 160 units from the Specialized Semiconductors Division, rather than externally, at a negotiated transfer price of $1,160 per unit, how much would
=+1. Would the market price of $1,320 per unit be an appropriate transfer price for Goho Manufacturing Company? Explain.
=+Systems Division. Except for the possible transfer ofmaterials between divisions, no changes are expected in sales and expenses.Instructions
=+*$1,320 of the $1,560 per unit represents materials costs, and the remaining $240 per unit represents other variable conversion expenses incurred within the Navigational Systems Division.The
=+Specialized Semi- Navigational conductors Division Systems Division Sales:640 units X $1,320 per unit $844,800 1,000 units X $1,984 per unit $1,984,000 Expenses:Variable:640 units X $776 per unit
=+operations for Navigational Systems Division, $195,200 Goho Manufacturing Company is a diversified aerospace company, including two operating divisions, Specialized Semiconductors and Navigational
=+4. Discuss the evaluation ofthe two divisions, using the performance measures determined in parts (1), (2), and (3).
=+3. Ifmanagements minimum acceptable rate ofreturn is 15%, determine the residual income for each division.
=+2. Using the DuPont formula for rate of return on investment, determine the profit margin, investment turnover, and rate ofreturn on investment for each division.
=+1. Prepare condensed divisional income statements for the year ended December 31, 2008, assuming that there were no service department charges.
=+Division ROI, 32%The vice president of operations of 14 Computers Inc. is evaluating the performance oftwo divi¬sions organized as investment centers. Invested assets and condensed income
=+5. Ifthe Paintball Division were in an industry where the profit margin could not be increased, how much would the investment turnover have to increase to meet the president’s required 20% rate
=+4. Which ofthe three proposals would meet the required 20% rate ofreturn on investment?
=+3. Using the DuPont formula for rate of return on investment, determine the profit margin, investment turnover, and rate of return on investment for each proposal Performance Evaluationfor
=+2. Prepare condensed estimated income statements and compute the invested assets for each proposal.
=+1. Using the DuPont formula for rate ofreturn on investment, determine the profit margin, invest¬ment turnover, and rate ofreturn on investment for the Paintball Division for the past year
=+Proposal 2: Reduce invested assets by discontinuing a product line. This action would eliminate sales of $75,000, cost of goods sold of $35,000, and operating expenses of $37,750.Assets of $32,500
=+Assume that the Paintball Division received no charges from service departments.The president of Outdoor Games Inc. has indicated that the division’s rate ofreturn on a$720,000 investment must be
=+3. If available funds permit the expansion of operations of only one division, which ofthe divi¬sions would you recommend for expansion, based on parts (1) and (2)? Explain.A condensed income
=+2. Using the DuPont formula for rate ofreturn on investment, compute the profit margin, investment turnover, and rate ofreturn on investment for each division.
=+1. Prepare condensed divisional income statements for the three divisions, assuming that there were no service department charges.
=+Divisional income statements and rate of return on investment analysis Hi-Growth Investments Inc. is a diversified investment company with three operating divisions organized as investment centers.
=+3. Provide a recommendation to the CEO for a better method for evaluating the performance ofthe regions. In your recommendation, identify the major weakness ofthe present method.
=+2. Identify the most successful region according to the profit margin.
=+1. Prepare quarterly income statements showing income from operations for the three regions.Use three column headings: Southeast, East, and South.
=+The company operates three service departments: the Dispatching Department, the Equip¬ment Management Department, and the Treasurer’s Department. The Dispatching Depart¬ment manages the
=+P14-2 Profit center responsibility reporting QbJ 3 SPREADSHEET y 1. Income from operations, South Region, $280,800 Cross-Country Transport Company organizes its three divisions, the Southeast,
=+2. For which costs might the supervisor be expected to request supplemental reports?
=+1. Prepare a budget performance report for the manager ofthe Southwest District of Pop Soft Drinks for the month of May.
=+P14-1 Budget performance report for a cost center The Southwest District of Pop Soft Drinks, Inc., is organized as a cost center. The budget for the Southwest District of Pop Soft Drinks, Inc., for
=+d. Ifthe negotiated price approach is used, what would be the range of acceptable transfer prices and why?
=+a. How much would Crow Manufacturings total income from operations increase?
=+E14-21 Decision on transfer pricing Ob] 5/b. $400,000 Based on Crow Manufacturings data in Exercise 14-20, assume that a transfer price of $110 has been established and that 40,000 units
=+c. How much would the Materials Divisions income from operations increase?
=+b. How much would the Industrial Divisions income from operations increase?
=+a. If a transfer price of $105 per unit is established and 40,000 units ofmaterials are transferred, with no reduction in the Materials Divisions current sales, how much would Crow Manufac¬turings
=+E14-20 Decision on transfer pricing Ob] 5/a. $1,000,000 Materials used by the Industrial Division ofCrow Manufacturing are currently purchased from outside suppliers at a cost of $120 per unit.
=+b. Why do you think UPS included a factor measuring employee sentiment?
=+a. Why did UPS introduce a balanced scorecard and nonfinancial measures in its new performance measurement system?
=+1. Customer satisfaction index—a measure of customer satisfaction.2. Employee relations index—a measure of employee sentiment and morale.3. Competitive position—delivery performance relative
=+E14-19 Balanced scorecard Ob] 4 Several years ago, United Parcel Service (UPS) believed that the Internet was going to change the parcel delivery market and would require UPS to become a more
=+American Express Company is a major financial services company, noted for its American Express® card. Below are some ofthe performance measures used by the company in its balanced
=+c. Interpret your results.
=+b. Determine the residual income for each division, assuming a minimum acceptable income of 14% oftotal assets. Round minimal acceptable return to the nearest million dollars.
=+a. Use the DuPont formula to determine the return on investment for each ofthe Hilton busi¬ness divisions. Round whole percents to one decimal place and investment turnover to one decimal place.
=+Financial information for each division, from a recent annual report, is as follows (in millions):Hotel Managing and Ownership Franchising Timeshare Revenues $2,215 $1,510 $421 Income from
=+• Hotel Ownership: Hotels owned and operated by Hilton.• Managing and Franchising: Hotels franchised to others or managed for others.• Timeshare: Resort properties managed for timeshare
=+Hilton Hotels Corporation provides lodging services around the world. The company is sepa¬rated into three major divisions:
=+c. Which division is the most profitable in terms of(1) return on investment and (2) residual income?
=+b. Determine the residual income for each division, assuming that the minimum acceptable rate ofreturn established by management is 9%.
=+a. Determine the missing items, identifying each by the letters (a) through (1).
=+Performance Evaluationfor Decentralized Operations 565 Data for the North, East, South, and West Divisions ofTor Max Semiconductor Communication Company are as follows:Sales Income from Operations
=+Determine the missing items, identifying each i Minimum Rate of Return Minimum Acceptable Income from Operations Residual Income 12% (b) (c)(0 $62,813 $16,750(h) $44,000 (i)10% (k) (1)by the
=+investment and residual incomes:Invested Assets Income from Operations Rate of Return on Investment$643,750 $115,875 (a)$418,750 (d) (e)$275,000 (g) 12%$600,000 $84,000 (j)
=+b. How do the four sectors differ in their profit margin, investment turnover, and return on investment?Data for Grobe Products Company is presented in the following table ofrates ofreturn on
=+a. Use the DuPont formula to determine the rate of return on investment for the four Disney sectors. Round whole percents to one decimal place and investment turnover to one decimal place.
=+• Consumer Products: Character merchandising, Disney stores, books, and magazines.Disney recently reported sector income from operations, revenue, and invested assets (in mil¬lions) as
=+• Studio Entertainment: Walt Disney Pictures, Touchstone Pictures, Hollywood Pictures, Miramax Films, and Buena Vista Theatrical Productions.
=+• Parks and Resorts: Walt Disney World Resort, Disneyland, Disney Cruise Line, and other resort properties.
=+• Media Networks: The ABC television and radio network, Disney channel, ESPN, A&E, El, and Disney.com.
=+The Walt Disney Company has four major sectors, described as follows:
=+E14-14 Rate ofreturn on investment Obj 4/a. Media Networks ROI, 10.1%
=+b. If expenses could be reduced by $52,500 without decreasing sales, what would be the impact on the profit margin, investment turnover, and rate of return on investment for the European Division?
=+a. Using the DuPont formula for rate ofreturn on investment, determine the profit margin, investment turnover, and rate ofreturn on investment ofthe European Division, assuming that $1,750,000 of
=+The manager ofthe European Division is considering ways to increase the rate ofreturn on investment.
=+The condensed income statement for the European Division ofCougar Motors Inc. is as follows(assuming no service department charges):Sales $875,000 Cost of goods sold 400,000 Gross profit $475,000

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