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The manager of the snack division of Fairfax Industries is evaluated on her division's return on investment and residual income. The company requires that all
The manager of the snack division of Fairfax Industries is evaluated on her division's return on investment and residual income. The company requires that all divisions generate a minimum return on invested assets of 8 percent. Consistent failure to achieve this minimum target is grounds for the dismissal ofa division manager. The annual cash bonus paid to division managers is 1 percent of residual income in excess of $100,000. The snack division's operating margin for the year was $9.817 million, during which time its average invested capital was $64.69? million. Required: a. Compute the Snack Division's return on investment and residual income. b. Will the manager of the Snack Division receive a bonus for her performance? If so, how much will it be? c. In reporting her investment center's performance for the past 10 years, the manager of the snack division accounted for the depreciation of her division's assets by using an accelerated depreciation method allowed for tax purposes. As result, virtually all of the assets under her control are fully depreciated. Given that the company's other division managers use straightline depreciation, is her use oi an accelerated method ethical? Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the Snack Division's return on investment and residual income. (Round "Return on investment" Enter your answer in dollars not in millions.) Return on investment Residual income Required B > Required A Required B Required C Will the manager of the Snack Division receive a bonus for her performance? If so, how much will it be? (Leave n if there is no bonus enter "0". Enter your answer in dollars not in millions. Round your answer to the nearest who amount.) Manager's bonusCBS Required A Required B Required C In reporting her investment center's performance for the past 10 years, the manager of the snack division accounted for the depreciation of her division's assets by using an accelerated depreciation method allowed for tax purposes. As a result, virtually all of the assets under her control are fully depreciated. Given that the company's other division managers use straight-line depreciation, is her use of an accelerated method ethical? Sh ow less A The use of accelerated depreciation will the division manager's current ROI and RI for two reasons: 1) her operating earnings margin will average asset base of her investment center will depreciation overtime will inflate her division's ROI and RI. Given that her bonus is based on RI, she will receive a larger bonus using accelerated depreciation than she would using the straight-line depreciation method
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