Question
TechWise Corporation evaluates the performance of its divisions using residual income. The following data pertains to Division A: Divisional income: $500,000 Divisional assets: $2,000,000 Minimum
TechWise Corporation evaluates the performance of its divisions using residual income. The following data pertains to Division A:
- Divisional income: $500,000
- Divisional assets: $2,000,000
- Minimum required rate of return: 12%
Calculate the residual income for Division A and evaluate its performance based on the residual income measure. Discuss the strengths and weaknesses of using residual income for performance evaluation compared to other measures such as return on investment (ROI) and economic value added (EVA).
GreenGrocery Company produces organic fruit jam using a continuous production process. During the current month, the company incurred the following costs for the jam production process:
- Beginning work in process inventory: 2,000 gallons, 40% complete
- Units started and completed: 10,000 gallons
- Ending work in process inventory: 3,000 gallons, 60% complete
The total costs incurred for the month were $50,000. Calculate the equivalent units of production for direct materials and conversion costs using the weighted-average method. Also, determine the cost per equivalent unit for direct materials and conversion costs.
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