Jimenez Corporation is a decentralized company, divided into 2 divisions, Division A and Division B. The centralized Technology Support Department of Jimenez budgets expenses of $280,000 and 10,000 hours of service for 2011. Division A actually used 2,000 hours of Technology Support Department service, and Division B actually used 3,000 hours of Help-Desk Technology Support Department service. Additional information for the company's two divisions are as follows: Division Division A B Sales $3,200,000 $3,305,000 Cost of goods sold 1,610,000 1,764,000 Selling expenses 264,000 235,000 Operating income before service department charges $1,326,000 $1,306,000 Average Invested assets $3,000,000 $1,000,000 44. Identify the cost pool. (amount and description) ______________________________________________________ 45. The costs object(s) is (are): _________________________________________ 46. The specific reason (specific to service department allocation) why Jimenez would use budgeted costs to allocate to user departments rather than actual costs is: (do NOT say that they do not know the costs yet). _______________________________________________________________________ _______________________________________________________________________ 47. In deciding how to allocate the costs of the IT Support Department, what would be the most logical allocation base? _______________________________________________ 48. What characteristic does this allocation base possess that makes it an appropriate method to distribute these costs? (Why is this a good allocation base?) __________________________________________________________ 49. The "charge rate" for IT support services at Jimenez Corp. is: (include units) $____________________ 50. Why would Jimenez operate a centralized IT support department, as opposed to allowing the divisions to handle this function separately on their own? ______________________________________________________________________ ______________________________________________________________________ Page 6 51. The amount of IT support costs allocated to the divisions A and B would be: Division A $_______________ Division B $_________________ 52. The income from operations AFTER service department charges for the two divisions would be: Division A $________________ Division B $________________ 53. The investment turnover for the Division A would be: (round to 2 decimal places) _____________ times 54. The profit margin of the Division B is: __________________% (round to nearest percent) 55. Assume that Jimenez has a potential investment project that will require an investment of $1,000,000 and has a projected return of $250,000. If divisional performance is based on ROI, the manager of which divisions would be in favor of this proposal? _______________________________ 56. Jimenez management has determined that it's average cost of capital is 10% and is using this as a benchmark or hurdle rate evaluate the divisional performance. They wish to use the residual income method to determine evaluate divisional performance. According to this measure, which division is performing better and by how much. ____________________________________________ 57. The principal cause of the lower ROI for the Division A is