The income from operations and the amount of invested assets in each division of Beck Industries are as follows:

	Income from Operations	Invested Assets
Retail Division	$119,700		630,000
Commercial Division	88,400		520,000
Internet Division	106,400		760,000

Assume that management has established a 12% minimum acceptable return for invested assets.

a. Determine the residual income for each division.

	Retail Division	Commercial Division	Internet Division
Income from operations	$119,700	$88,400	$106,400
Minimum acceptable of income from operations	fill in the blank 1		fill in the blank 2		fill in the blank 3
Residual income	$fill in the blank 4		$fill in the blank 5		$fill in the blank 6

b. Which division has the most residual income?

Commercial DivisionRetail DivisionInternet Division

2.The income from operations and the amount of invested assets in each division of Beck Industries are as follows:

	Income from Operations	Invested Assets
Retail Division	$164,000		$820,000
Commercial Division	102,600		570,000
Internet Division	210,000		840,000

a. Compute the return on investment for each division. (Round to the nearest whole number.)

Division	Percent
Retail Division	fill in the blank 1%
Commercial Division	fill in the blank 2%
Internet Division	fill in the blank 3%

b. Which division is the most profitable per dollar invested?

Commercial DivisionInternet DivisionRetail Division

3.Wild Sun Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared:

Wild Sun Airlines Inc. Divisional Income Statements For the Year Ended December 31, 20Y9
	Passenger Division		Cargo Division
Revenues			$2,288,000				$2,288,000
Operating expenses		1,852,270		2,037,790
Income from operations before service department charges		$435,730		$250,210
Less service department charges:
	Training	$101,050		$101,050
	Flight scheduling	99,820		99,820
	Reservations	100,750	301,620	100,750	301,620
Income from operations		$134,110		$(51,410)

The service department charge rate for the service department costs was based on revenues. Because the revenues of the two divisions were the same, the service department charges to each division were also the same.

The following additional information is available:

	Passenger Division	Cargo Division	Total
Number of personnel trained	310		120		430
Number of flights	390		530		920
Number of reservations requested	15,500		0		15,500

Question Content Area

a. Does the income from operations for the two divisions accurately measure performance? Explain.

The reported income from operations

doesdoes not

accurately measure performance because the service department charges are based on

expensesrevenues

. Revenues

areare not

associated with the profit center manager's use of the service department services.

Question Content Area

b. Correct the divisional income statements, using the activity bases provided in revising the service department charges. If an amount box does not require an entry, leave it blank, or enter "0". Do not round your interim calculations.

		Passenger Division		Cargo Division
Gross profitOperating expensesRevenuesTraining		$- Select -		$- Select -
Flight schedulingIncome from operationsOperating expensesReservations		- Select -		- Select -
Income from operations before service department charges		$fill in the blank e0d447009029065_7		$fill in the blank e0d447009029065_8
Less service department charges:
Income from operationsOperating expensesRevenuesTraining	$- Select -		$- Select -
Cost of goods soldFlight schedulingIncome from operationsOperating expenses	- Select -		- Select -
Loss from operationsOperating expensesReservationsRevenues	- Select -	- Select -	- Select -	- Select -
Gross profitIncome from operationsIncome from operations before service department chargesLoss from operations		$- Select -		$- Select -