Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

could someone please explain these questions? thanks Question 8 (13 marks) Billings Company is a decentralised wholesaler with two autonomous divisions. The divisions are evaluated

could someone please explain these questions? thanks

image text in transcribedimage text in transcribed
Question 8 (13 marks) Billings Company is a decentralised wholesaler with two autonomous divisions. The divisions are evaluated on the basis of return on investment (ROI), with year-end bonuses given to the divisional managers who have the highest ROIs. Operating results for the company's two divisions - X and Y for the most recent year are given below: Division X Division Y Sales $ 10,500,000 $ 458,000 Cost of goods sold 6,000,000 316,000 Operating expenses 3,200,000 58,000 Invested capital at the beginning of the year 3,000,000 1,200,000 Invested capital at the end of the year 5,000,000 2,000,000 The company had an overall ROI of 15% last year. The company is considering an expansion project in the upcoming year. The project would be implemented by one of the two divisions. The following data relate to the project: Expansion project Sales $ 2,000,000 Cost of goods sold 1,200,000 Operating expenses 640,000 Invested capital 1,000,000(ii) Calculate ROI of the two divisions with the expansion project and explain the likely reaction of each divisional manager towards the expansion. Show all computations to support your answer. (4 marks) (iii) Explain the likely reaction of Billings Company's corporate management to the expansion. Show all computations to support your answer. (2 marks) (iv) Calculate residual income (R1) of the two divisions with the expansion project and without the expansion project, and explain the likely reaction of each divisional manager towards the expansion, if the two divisions are evaluated on the basis of residual income (RI). Assume the minimum required rate is 12 per cent on invested capital. {A may]:\\

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Global Strategy

Authors: Mike W. Peng

5th Edition

0357512367, 978-0357512364

Students also viewed these Accounting questions

Question

Differentiate 3sin(9x+2x)

Answered: 1 week ago

Question

Compute the derivative f(x)=(x-a)(x-b)

Answered: 1 week ago