Exam 12: Segment Reporting, Decentralization, and the Balanced Scorecard

Residual income is primarily useful because it helps to compare the performance of divisions of different sizes.

Reardon Retail Company consists of two stores, A and B. Store A had sales of $80,000 during March, a contribution margin ratio of 30%, and a segment margin of $11,000. The company as a whole had sales of $200,000, a contribution margin ratio of 36%, and segment margins for the two stores totaling $31,000. If net operating income for the company was $15,000 for the month, the traceable fixed expenses in Store B must have been:

Beak Industries is a division of a major corporation. Last year the division had total sales of $10,600,000, net operating income of $1,070,600, and average operating assets of $4,000,000. -The division's margin is closest to:

Data for September for Mossman Corporation and its two major business segments, North and South, appear below: In addition, common fixed expenses totaled $319,000 and were allocated as follows: $160,000 to the North business segment and $159,000 to the South business segment. -A properly constructed segmented income statement in a contribution format would show that the net operating income of the company as a whole is:

Campion Company has two divisions, A and B. The following data pertain to operations in May: If common fixed expenses were $10,000, total fixed expenses were:

Gebru Industries is a division of a major corporation. Last year the division had total sales of $12,450,000, net operating income of $1,357,050, and average operating assets of $3,000,000. The company's minimum required rate of return is 10%. Required: a. What is the division's margin? b. What is the division's turnover? c. What is the division's return on investment (ROI)?

Data for September for Mossman Corporation and its two major business segments, North and South, appear below: In addition, common fixed expenses totaled $319,000 and were allocated as follows: $160,000 to the North business segment and $159,000 to the South business segment. -The contribution margin of the South business segment is:

The Axle Division of LaBate Company makes and sells only one product. Annual data on the Axle Division's single product follow: -Suppose the manager of Axle desires an annual residual income of $45,000. In order to achieve this, Axle should sell how many units per year?

Assume that Cranberry was being evaluated solely on the basis of return on investment (ROI). Which of the following investment opportunities would Cranberry want to invest in?

Deano Products is a division of a major corporation. The following data are for the last year of operations: -The division's return on investment (ROI) is closest to:

The Consumer Products Division of Garafalo Corporation had average operating assets of $300,000 and net operating income of $46,900 in March. The minimum required rate of return for performance evaluation purposes is 16%. -What was the Consumer Products Division's minimum required return in March?

The West Division of Fitzmaurice Corporation had average operating assets of $450,000 and net operating income of $87,300 in November. The minimum required rate of return for performance evaluation purposes is 18%. -What was the West Division's residual income in November?

Ceder Products is a division of a major corporation. Last year the division had total sales of $21,520,000, net operating income of $538,000, and average operating assets of $8,000,000. The company's minimum required rate of return is 18%. -The division's return on investment (ROI) is closest to:

The Axle Division of LaBate Company makes and sells only one product. Annual data on the Axle Division's single product follow: -If Axle sells 16,000 units per year, the return on investment should be:

Bonniwell Corporation has two divisions: the Delta Division and the Alpha Division. The Delta Division has sales of $620,000, variable expenses of $359,600, and traceable fixed expenses of $229,200. The Alpha Division has sales of $820,000, variable expenses of $541,200, and traceable fixed expenses of $172,900. The total amount of common fixed expenses not traceable to the individual divisions is $122,000. What is the company's net operating income?

Beak Industries is a division of a major corporation. Last year the division had total sales of $10,600,000, net operating income of $1,070,600, and average operating assets of $4,000,000. -The division's return on investment (ROI) is closest to:

Kulp Corporation has two major business segments-East and West. In July, the East business segment had sales revenues of $900,000, variable expenses of $441,000, and traceable fixed expenses of $171,000. During the same month, the West business segment had sales revenues of $450,000, variable expenses of $234,000, and traceable fixed expenses of $45,000. The common fixed expenses totaled $321,000 and were allocated as follows: $180,000 to the East business segment and $141,000 to the West business segment. -A properly constructed segmented income statement in a contribution format would show that the net operating income of the company as a whole is:

Ferro Wares is a division of a major corporation. The following data are for the latest year of operations: Required: a. What is the division's return on investment (ROI)? b. What is the division's residual income?

Howe Company increased its ROI from 20% to 25%. Net operating income and sales remained at their previous levels of $40,000 and $1,000,000 respectively. The increase in ROI was attributed to a reduction in operating assets brought about by the sale of obsolete inventory at cost (the proceeds from the sale were used to reduce bank loans). By how much was inventory reduced?