Ch. 12 In-Class (Module 5) Excel templates with solutions1

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Brief Exercise 12-1 Recognizing the Principles of Decentralization (LO1 - CC1) Please go to Ch. 12 In-Class (Module 5) on Connect

Brief Exercise 12-2 Preparing a Segment Performance Report (LO1 - CC Required: Prepare a segmented performance report for Klinker Corporation. KLINKER CORPORATION Segment Performance Report Profit Centres Europe Asia Sales revenue $1,200,000 $3,800,000 $1,000,000 Deduct: Variable costs 360,000 1,140,000 300,000 Contribution margin 840,000 2,660,000 700,000 Deduct: Direct fixed costs 270,000 900,000 600,000 Segment margin $570,000 $1,760,000 $100,000 Deduct: Common fixed costs Operating income Klinker Corporation consists of three segments: North America, Europe, and Asia. Reven segments were $1,200,000, $3,800,000, and $1,000,000, respectively. Variable costs am three segments, whereas the fixed expenses for each segment were $270,000, $900,000 The common fixed expenses for the company amounted to $1,590,000 for the year. North American

C3) List 1 $6,000,000 Contribution marg 1,800,000 -30% x Sales Deduct: Common 4,200,000 Deduct: Direct fixe 1,770,000 Also known as traceable fixed costs Deduct: Variable c 2,430,000 Sales revenue 1,590,000 Segment margin $840,000 nues this year for the three mounted to 30% of sales for all 0, and $600,000, respectively. Total Company

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gin fixed costs ed costs costs

Brief Exercise 12-3 Computing the ROI (LO2 - CC4) Crawford Company's plans for a new product require a target cost per unit of $33.33. It plans to Required: Step 1: Calculate net income # of units Per unit Total Sales 30,000 $40.00 $1,200,000 Cost 30,000 $33.33 999,900 Net income $200,100 May also use Net operatin Step 2: Calculate expected margin Net income $200,100 Sales $1,200,000 Expected margin 16.68% Sales $1,200,000 Average operating assets $900,000 Turnover 1.33 Margin 16.68% Turnover 1.33 ROI 22.18% =16.68%x1.33 1. Compute the expected margin for Crawford Company. (Round your percenta 2. Compute the expected sales turnover for Crawford Company. (Round your answer to 2 de 3. Compute the ROI for Crawford Company. (Round intermediate calculations to 2 decimal your percentage answer rounded to two decimal places (i.e., 0.1234 should be entered a

o sell 30,000 units at $40 per unit. The average investment, including design and developme ng income Method 2 of calculating ROI NOI/Avg Operating Assets =$200,100/$900,000 22.23% age answer rounded to two decimal places (i.e., 0.1234 should be entered ecimal places.) l places. Enter as 12.34).)

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ent, is $900,000. d as 12.34%).)

Brief Exercise 12-4 Computing Effects of Changes in Sales, Expenses, and Sales $3,000,000 Net operating income $450,000 Average operating assets $1,800,000 Required: Consider each question below independently. ROI formula= Net operating income x Sales Sales Average operating assets Margin: Net operating income $450,000 Sales $3,000,000 15.00% Turnover: Sales $3,000,000 Average operating assets $1,800,000 1.67 ROI 25.05% New amounts Sales $4,500,000 =$3,000,000x150% Net operating income $1,350,000 =$450,000 x 300%= $450,000 + ($4 Average operating assets $1,800,000 Margin: Net operating income $1,350,000 Sales $4,500,000 30.00% Turnover: Sales $4,500,000 Average operating assets $1,800,000 2.50 ROI 75.00% CommercialServices.com Corporation provides business-to-business services on the Internet. 1. Compute the company's ROI. (Round intermediate calculations to 2 decimal places. Ent decimal places (i.e., 0.1234 should be entered as 12.34).) 2. The entrepreneur who founded the company is convinced that sales will increase next year b as a result by 200%, with no increase in average operating assets. What would be the compan

New amounts Sales $4,000,000 =$3,000,000+$1,000,000 Net operating income $600,000 =$450,000+$150,000 Average operating assets $2,000,000 =$1,800,000+$200,000 Margin: Net operating income $600,000 Sales $4,000,000 15.00% Turnover: Sales $4,000,000 Average operating assets $2,000,000 2.00 ROI 30.00% Operating Assets include Cash, Accounts Receivable, Inventory, Plant (Building), Equipment a Average Operating Assets is (Opening Balance + Ending balances of operating Assets)/ 2 3. The chief financial officer of the company believes a more realistic scenario would be a $1,0 increase in average operating assets, with a resulting $150,000 increase in net operating incom scenario?

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Assets on ROI (LO2 - CC4, 5) =15%x1.67 450,000 x 200%) =30% x 2.5 Data concerning the most recent year follow: ter your percentage answer rounded to two by 50% and that net operating income will increase ny’s ROI? (Do not round intermediate calculations.)

and all other assets held for productive use. 000,000 increase in sales, requiring a $200,000 me. What would be the company’s ROI in this

Brief Exercise 12-5 Computing Residual Income (LO2 - CC6) Required: Compute the company’s residual income for the year. Approach 1: Net operating income $614,000 Less: Minimum required return Average operating assets $2,800,000 Minimum required rate of return 18% $504,000 =$2,800,000 x 18% Residual income $110,000 =$614,000-$504,000 Approach 2: Net operating income $614,000 Average operating assets $2,800,000 ROI 21.93% =$614,000/$2,800,000 Minimum required rate of return 18% Difference 3.93% =21.93%-18% Average operating assets $2,800,000 Residual income $110,000 =3.93% x $2,800,000 Eucalyptus Design Ltd. of Canberra, Australia, is a company specializing in providing design services to residential developers. Last year, the company had net operating income of $614,000 on sales of $3,000,000. The company’s average operating assets for the year were $2,800,000, and its minimum required rate of return was 18%.

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Brief Exercise 12-7 Calculating RI (LO2 - CC6) Xylo Co. reported the following statistics and results for 2020: ROI 14% Invested capital (average operating assets) $200,000 Cost of capital (minimum required rate of return) 10% What was Xylo’s residual income for 2020? Approach 2: ROI 14% Cost of capital 10% Difference 4% =14%-10%=4% Invested capital (average operating assets $200,000 Residual income $8,000 =4% x $200,000 Approach 1: Invested capital (average operating assets) $200,000 ROI 14% Net operating income $28,000 =$200,00 Less: Minimum required return Average operating assets $200,000 Minimum required rate of return 10% $20,000 Residual income $8,000 =$28,000 Required:

00 x 14% 0-$20,000

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