CP 24-5 Evaluating divisional performance The three divisions of Yummy Foods are Snack Goods, Cereal, and Frozen Foods. The divisions are structured as investment centers. The following responsibility reports were prepared for the three divisions for the prior year:
CP 24-5 Evaluating divisional performance The three divisions of Yummy Foods are Snack Goods, Cereal, and Frozen Foods. The divisions are structured as investment centers. The following responsibility reports were prepared for the three divisions for the prior year:
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
CP 24-5 Evaluating divisional performance
Answer questions 1,2 & 3 please
Transcribed Image Text:Decentralized Operations
Should the cost of the brochure be transferred to the Customer Service Depart-
ment in order to hold the Customer Service Department head accountable for the cost of
the brochure? What changes in policy would you recommend?
CP 24-5 Evaluating divisional performance
The three divisions of Yummy Foods are Snack Goods, Cereal, and Frozen Foods. The
uo to
divisions are structured as investment centers. The following responsibility reports were
prepared for the three divisions for the prior year:
cont
Snack Goods
Cereal
Frozen Foods
Revenues
$2,200,000
$2,520,000
$2,100,000
Operating expenses
1,366,600
1,122,000
976,800
GX
Income from operations before
v o o end service department charges
$ 833,400
$1,398,000
$1,123,200
oni bioue
buce
Service department charges:
$ 468,000
000'009 $ 000'00
235,200
Promotion
00
give$ 437,400 $ 843,600
Legal
137,400
OLD
201A
nooima o Total service department charges
$ 703,200
$ 420,000
Income from operations woh
$ 554,400
000'96E $
Invested assets
$1,680,000
$1,750,000
000'000
1. Which division is making the best use of invested assets and should be given priority
for future capital investments?
no 2.
Jewould all investments that produce a return in excess of 19% be accepted by the
divisions? Explain. b Inioan oe07g Jemal not
Assuming that the minimum acceptable return on new projects is 19%,
3.
Identify opportunities for improving the company's financial performance.
CP 24-6 Evaluating division performance
Last Resort Industries Inc. is a privately held diversified company with five separate di-
visions organized as investment centers. A condensed income statement for the Specialty
Products Division for the past year, assuming no service department charges, is as follows:
Last Resort Industries Inc.-Specialty Products Division
Income Statement
For the Year Ended December 31, 20Y5
Sales
$32,400,000
Cost of goods sold
24,300,000
000 001 83
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