Question
The table is the actual results for the year. Round amounts to dollars and percentages to one decimal. Note that there are several cost centres,
The table is the actual results for the year. Round amounts to dollars and percentages to one decimal. Note that there are several cost centres, profit centres and investment centres in the actuals results. The Total column is the entire company managed by a chief executive officer while Plants, Departments (e.g., Dept 1 and 2) and specific period costs are managed by other managers given their assigned responsibilities. Within the Plants, there are two departments per Plant (e.g., Plant A has departments 1 and 2 and Plant B also has departments 1 and 2, separately managed). Period costs are allocated based on an activity-based accounting driver and are not separate cost centres within the Plants. The company manages with four investments centres, four profit centres and nine costs centres. The company has set goals for return on sales of 10%, return on investment of 10% and positive residual income using 10%. Questions: Briefly describe why responsibility centres are used including a major requirement that enhances usefulness and motivation to managers. (1 mark) For the appropriate responsibility centres, based on the actual results, calculate: (12 marks) Return on Investment Residual Income The Dupont returns (show Margin X Asset Turnover) Using the calculations in 2, are the centres you chose good or bad and why? (2 marks
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started