1.

Calculating Average Operating Assets, Margin, Turnover, and Return on Investment

East Mullett Manufacturing earned operating income last year as shown in the following income statement:

Sales	$531,250
Cost of goods sold	280,000
Gross margin	$251,250
Selling and administrative expense	189,600
Operating income	$61,650
Less: Income taxes (@ 40%)	24,660
Net income	$36,990

At the beginning of the year, the value of operating assets was $390,000. At the end of the year, the value of operating assets was $460,000.

Required:

For East Mullett Manufacturing, calculate the following:

1. Average operating assets	$ _________________
2. Margin (round to two decimal places)	_________________	%
3. Turnover (round to two decimal places)	_________________
4. Return on investment (round to one decimal place)	_________________	%

2.

Calculating Cycle Time and Velocity

Indy Company has the following data for one of its manufacturing plants:

1. Maximum units produced in a quarter (3-month period): 250,000 units
2. Actual units produced in a quarter (3-month period): 206,000 units
3. Productive hours in one quarter: 25,000 hours

Required:

1. Compute the theoretical cycle time (in minutes). _________________ minutes per unit

2. Compute the actual cycle time (in minutes). Round your answer to two decimal places. _________________ minutes per unit

3. Compute the theoretical velocity in units per hour. _________________ units per hour

4. Compute the actual velocity in units per hour. Round your answer to two decimal places. _________________ units per hour

3.

Calculating Manufacturing Cycle Efficiency

Delko Company has the following data for one of its manufacturing plants:

1. Maximum units produced in a quarter (3-month period): 250,000 units
2. Actual units produced in a quarter (3-month period): 191,000 units
3. Productive hours in one quarter: 25,000 hours
4. Actual cycle time: 7.85 minutes
5. Theoretical cycle time: 6 minutes

Required:

1. Calculate the amount of processing time and the amount of nonprocessing time. If required, round your answers to two decimal places.

Processing time	_________________ minutes
Nonprocessing time	_________________ minutes

2. Calculate the MCE. If required, round your answer to nearest whole number. _________________ %

4.

Types of Responsibility Centers

Consider each of the following independent scenarios:

Required:

For each of the below independent scenarios, indicate the type of responsibility center involved (cost, revenue, profit, or investment).

1. Terrin Belson, plant manager for the laser printer factory of Compugear Inc., brushed his hair back and sighed. December had been a bad month. Two machines had broken down, and some factory production workers (all on salary) were idled for part of the month. Materials prices increased, and insurance premiums on the factory increased. No way out of it; costs were going up. He hoped that the marketing vice president would be able to push through some price increases, but that really wasn't his department. _________________
2. Joanna Pauly was delighted to see that her ROI figures had increased for the third straight year. She was sure that her campaign to lower costs and use machinery more efficiently (enabling her factories to sell several older machines) was the reason why. Joanna planned to take full credit for the improvements at her semiannual performance review. _________________
3. Gil Rodriguez, sales manager for ComputerWorks, was not pleased with a memo from headquarters detailing the recent cost increases for the laser printer line. Headquarters suggested raising prices. "Great," thought Gil, "an increase in price will kill sales and revenue will go down. Why can't the plant shape up and cut costs like every other company in America is doing? Why turn this into my problem?" _________________
4. Susan Whitehorse looked at the quarterly profit and loss statement with disgust. Revenue was down, and cost was up?what a combination! Then she had an idea. If she cut back on maintenance of equipment and let a product engineer go, expenses would decrease?perhaps enough to reverse the trend in income. _________________
5. Shonna Lowry had just been hired to improve the fortunes of the Southern Division of ABC Inc. She met with top staff and hammered out a 3-year plan to improve the situation. A centerpiece of the plan is the retiring of obsolete equipment and the purchasing of state-of-the-art, computer-assisted machinery. The new machinery would take time for the workers to learn to use, but once that was done, waste would be virtually eliminated. _________________

5.

Margin, Turnover, Return on Investment, Average Operating Assets

Park Company provided the following income statement for last year:

Sales	$80,000
Less: Variable expenses	54,000
Contribution margin	$26,000
Less: Fixed expenses	19,600
Operating income	$6,400

At the beginning of last year, Park had $38,690 in operating assets. At the end of the year, Park had $41,310 in operating assets.

Required:

Compute ROI. Do not round interim calculations, but do round your final answer to two decimal places. If required, use a minus sign to indicate a negative ROI. ROI = _________________ %

6.

Residual Income

The Home Products Division of Schipper Company had operating income last year of $112,200 and average operating assets of $780,000. Schipper's minimum acceptable rate of return is 10%.

Required:

Calculate the residual income for the Home Products Division. Round your answer to the nearest dollar. Residual income $ _________________

7.

Economic Value Added

Falconer Company had net (after-tax) income last year of $12,870,416 and total capital employed of $121,811,860. Falconer's actual cost of capital was 10%.

Required:

1. Calculate the EVA for Falconer Company. Enter negative values as negative numbers, if required. $ _________________

2. Conceptual Connection: Is Falconer creating or destroying wealth? _________________

8.

Balanced Scorecard

The following are a number of measures associated with the Balanced Scorecard.

Required:

1. Classify each performance measure as belonging to one of the following perspectives: financial, customer, internal business process, or learning and growth.

a.	Number of new customers.	_________________
b.	Percentage of customer complaints resolved with one contact.	_________________
c.	Unit product cost.	_________________
d.	Cost per distribution channel.	_________________
e.	Suggestions per employee.	_________________
f.	Warranty repair costs.	_________________
g.	Consumer satisfaction (from surveys).	_________________
h.	Cycle time for solving a customer problem.	_________________
i.	Strategic job coverage ratio.	_________________
j.	On-time delivery percentage.	_________________
k.	Percentage of revenues from new products.	_________________

2. Select an additional measure that would be appropriate for each of the four perspectives.

Financial	_________________
Customer	_________________
Internal business process	_________________
Learning and growth	_________________

1. Calculating Average Operating Assets, Margin, Turnover, and Return on Investment East Mullett Manufacturing earned operating income last year as shown in the following income statement: Sales $531,250 Cost of goods sold Gross margin 280,000 $251,250 Selling and administrative expense 189,600 Operating income $61,650 Less: Income taxes (@ 40%) Net income 24,660 $36,990 At the beginning of the year, the value of operating assets was $390,000. At the end of the year, the value of operating assets was $460,000. Required: For East Mullett Manufacturing, calculate the following: 1. Average operating assets 2. Margin (round to two decimal places) 3. Turnover (round to two decimal places) 4. Return on investment (round to one decimal place) 2. Calculating Cycle Time and Velocity Indy Company has the following data for one of its manufacturing plants: 1. Maximum units produced in a quarter (3month period): 250,000 units 2. Actual units produced in a quarter (3month period): 206,000 units 3. Productive hours in one quarter: 25,000 hours Required: 1. Compute the theoretical cycle time (in minutes). _________________ minutes per unit 2. Compute the actual cycle time (in minutes). Round your answer to two decimal places. _________________ minutes per unit 3. Compute the theoretical velocity in units per hour. _________________ units per hour 4. Compute the actual velocity in units per hour. Round your answer to two decimal places. _________________ units per hour 3. Calculating Manufacturing Cycle Efficiency Delko Company has the following data for one of its manufacturing plants: 1. Maximum units produced in a quarter (3month period): 250,000 units 2. Actual units produced in a quarter (3month period): 191,000 units 3. Productive hours in one quarter: 25,000 hours 4. Actual cycle time: 7.85 minutes 5. Theoretical cycle time: 6 minutes Required: 1. Calculate the amount of processing time and the amount of nonprocessing time. If required, round your answers to two decimal places. Processing time _________________ minutes Nonprocessing time _________________ minutes 2. Calculate the MCE. If required, round your answer to nearest whole number. _________________ % 4. Types of Responsibility Centers Consider each of the following independent scenarios: Required: For each of the below independent scenarios, indicate the type of responsibility center involved (cost, revenue, profit, or investment). a. Terrin Belson, plant manager for the laser printer factory of Compugear Inc., brushed his hair back and sighed. December had been a bad month. Two machines had broken down, and some factory production workers (all on salary) were idled for part of the month. Materials prices increased, and insurance premiums on the factory increased. No way out of it; costs were going up. He hoped that the marketing vice president would be able to push through some price increases, but that really wasn't his department. _________________ b. Joanna Pauly was delighted to see that her ROI figures had increased for the third straight year. She was sure that her campaign to lower costs and use machinery more efficiently (enabling her factories to sell several older machines) was the reason why. Joanna planned to take full credit for the improvements at her semiannual performance review. _________________ c. Gil Rodriguez, sales manager for ComputerWorks, was not pleased with a memo from headquarters detailing the recent cost increases for the laser printer line. Headquarters suggested raising prices. "Great," thought Gil, "an increase in price will kill sales and revenue will go down. Why can't the plant shape up and cut costs like every other company in America is doing? Why turn this into my problem?" _________________ d. Susan Whitehorse looked at the quarterly profit and loss statement with disgust. Revenue was down, and cost was upwhat a combination! Then she had an idea. If she cut back on maintenance of equipment and let a product engineer go, expenses would decreaseperhaps enough to reverse the trend in income. _________________ e. Shonna Lowry had just been hired to improve the fortunes of the Southern Division of ABC Inc. She met with top staff and hammered out a 3year plan to improve the situation. A centerpiece of the plan is the retiring of obsolete equipment and the purchasing of stateoftheart, computer assisted machinery. The new machinery would take time for the workers to learn to use, but once that was done, waste would be virtually eliminated. _________________ 5. Margin, Turnover, Return on Investment, Average Operating Assets Park Company provided the following income statement for last year: Sales Less: Variable expenses $80,000 54,000 Contribution margin $26,000 Less: Fixed expenses 19,600 Operating income $6,400 At the beginning of last year, Park had $38,690 in operating assets. At the end of the year, Park had $41,310 in operating assets. Required: Compute ROI. Do not round interim calculations, but do round your final answer to two decimal places. If required, use a minus sign to indicate a negative ROI. ROI = _________________ % 6. Residual Income The Home Products Division of Schipper Company had operating income last year of $112,200 and average operating assets of $780,000. Schipper's minimum acceptable rate of return is 10%. Required: Calculate the residual income for the Home Products Division. Round your answer to the nearest dollar. Residual income $ _________________ 7. Economic Value Added Falconer Company had net (aftertax) income last year of $12,870,416 and total capital employed of $121,811,860. Falconer's actual cost of capital was 10%. Required: 1. Calculate the EVA for Falconer Company. Enter negative values as negative numbers, if required. $ _________________ 2. Conceptual Connection: Is Falconer creating or destroying wealth? _________________ 8. Balanced Scorecard The following are a number of measures associated with the Balanced Scorecard. Required: 1. Classify each performance measure as belonging to one of the following perspectives: financial, customer, internal business process, or learning and growth. a. Number of new customers. b. Percentage of customer complaints resolved with one contact. c. Unit product cost. d. Cost per distribution channel. e. Suggestions per employee. f. Warranty repair costs. g. Consumer satisfaction (from surveys). h. Cycle time for solving a customer problem. i. Strategic job coverage ratio. j. Ontime delivery percentage. k. Percentage of revenues from new products. 2. Select an additional measure that would be appropriate for each of the four perspectives. Financial _________________ Customer _________________ Internal business process _________________ Learning and growth _________________