Exam 10: Decentralizing and Performance Evaluation

-Dublin Corporation has operating income of $15,000 on $200,000 of sales.Dublin's average operating assets total $100,000.The corporation has a minimum required return of 18%. Required: Calculate Dublin's return on investment using the DuPont method.Show your work.

Ronaldi Corporation's Port division has a segment margin of $400,000 and net sales revenue of $4,400,000 for the current reporting period.The division has an asset turnover of 1.5.What is the division's ROI?

In the most recent reporting period,Athens Corporation's Legion division generated net revenues of $2,000,000 and variable expenses of $700,000.Direct fixed expenses were $500,000 and common corporate fixed expenses were $250,000.What is the division's segment margin? a.$550,000 b.$800,000 c.$1,050,000 d.$1,300,000

The Machining division makes a component part that the Assembly division needs for a new product.The Machining division's variable cost of manufacturing the component is $25 per a.Calculate the cost-based transfer price that the Machining division should charge the Assembly division. b.Calculate the market-based transfer price that the Machining division should charge the Assembly division. c.What arguments would the Machining division's manager and the Assembly division's manager make in an attempt to get the price each wants?

A negotiated price is one that

An organizational structure in which decision-making authority for the entire organization rests in the hands of one person or a small group of people in a single location is called centralization.

A profit center manager's performance is measured using methods such as return on investment or residual income.

An investment center manager's performance can be based on

A disadvantage of decentralization is that decision making is spread throughout the organization.This is a disadvantage because

The goal of the cost center manager is to minimize total costs and to maximize profit.

Net operating profit is defined as

Winek Company's Tackle division has collected the following information: Normal selling price $18 per box Variable product costs 10.25 per box Fixed product costs 3.50 per box Variable selling and administrative costs 2.75 per box The Tackle division has no excess capacity.Winek's Little Fisherman division sells completed fishing kits for children and wants to purchase 100,000 tackle boxes.The minimum transfer price would be

In the Dupont Model for calculating ROI,which of the following components appears on both the margin side of the expression and the asset turnover side?

The ROI formula decomposed into two components,margin and asset turnover,is referred to as the Deaumon Model.

The organizational structure in which decision-making authority for the entire organization rests in the hands of one person or a small group of people in a single location is called

The manager of which of the following responsibility centers is expected to invest in assets that generate profit?

Segment margin income statements are most useful to managers when they are prepared

If a cost is incurred specifically for a segment of an organization,it is referred to as a

Tillamoke Company produces gourmet cheeses.Selected results from the most current year were as follows: Sales revenue $3,500,000 Operating income 560,000 Average total assets 5,000,000 Production manager Melinda Penland is investing the purchase of a new fermenting station that will increase the plant's production capacity.Based on her research,Melinda thinks the station would cost $140,000 and would increase sales revenue by $200,000 and operating profit by $32,000. Required a.Calculate Tillamoke's current margin,asset turnover,and return on investment. b.Calculate Tillamoke's margin,asset turnover,and return on investment assuming the company purchases the new fermenting station. c.Assume Melinda Penland's annual bonus is based on the company's return on investment.Will Melinda support the purchase of the new fermenting station? Why or why not?

Burton Corporation's Central region operates an investment center.John Meadows,the region's director,has set a 15% required minimum rate of return.John is considering investing in a $50,000 machine that is expected to generate $20,000 in additional income. Required: Calculate the machine's residual income.Show your work.