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Exercise 14-32 (Algo) Comparing Business Units Using Residual Income (LO 14-3) Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: Revenues Cost of sales Selling, General and Administrative (all fixed) Corporate overhead Region I $ 1,218,000 459,000 447,000 Region II $ 1,680,000 819,000 657,000 Region III $ 2,268,000 1,149,000 877,000 Total Corporation $ 5,166,000 2,427,000 1,981,000 Information on the division assets in the three regions of Lauderdale Corporation follows: Region I Region II Region III $ 718,000 648,000 1,314,500 Lauderdale Corporation has a cost of capital of 8.6 percent. Required: a. Compute residual Income for the three regions. Ignore taxes. b. How have these regions performed? 468,000 Complete this question by entering your answers in the tabs below. Required A Required B Compute residual income for the three regions. Ignore taxes. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. Residual Income Region I Region II Region III Required A Required B

Exercise 14-32 (Algo) Comparing Business Units Using Residual Income (LO 14-3) Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: Revenues Cost of sales Selling, General and Administrative (all fixed) Corporate overhead Region I $ 1,218,000 459,000 447,000 Region II $ 1,680,000 819,000 657,000 Region III $ 2,268,000 1,149,000 877,000 Total Corporation $ 5,166,000 2,427,000 1,981,000 Information on the division assets in the three regions of Lauderdale Corporation follows: Region I Region II Region III $ 718,000 648,000 1,314,500 Lauderdale Corporation has a cost of capital of 8.6 percent. Required: a. Compute residual Income for the three regions. Ignore taxes. b. How have these regions performed? 468,000 Complete this question by entering your answers in the tabs below. Required A Required B Compute residual income for the three regions. Ignore taxes. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. Residual Income Region I Region II Region III Required A Required B

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Exercise 14-32 (Algo) Comparing Business Units Using Residual Income (LO 14-3) Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: Revenues Cost of sales Selling, General and Administrative (all fixed) Corporate overhead Region I $ 1,218,000 459,000 447,000 Region II $ 1,680,000 819,000 657,000 Region III $ 2,268,000 1,149,000 877,000 Total Corporation $ 5,166,000 2,427,000 1,981,000 Information on the division assets in the three regions of Lauderdale Corporation follows: Region I Region II Region III $ 718,000 648,000 1,314,500 Lauderdale Corporation has a cost of capital of 8.6 percent. Required: a. Compute residual Income for the three regions. Ignore taxes. b. How have these regions performed? 468,000 Complete this question by entering your answers in the tabs below. Required A Required B Compute residual income for the three regions. Ignore taxes. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. Residual Income Region I Region II Region III Required A Required B
Transcribed Image Text:Exercise 14-32 (Algo) Comparing Business Units Using Residual Income (LO 14-3) Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: Revenues Cost of sales Selling, General and Administrative (all fixed) Corporate overhead Region I $ 1,218,000 459,000 447,000 Region II $ 1,680,000 819,000 657,000 Region III $ 2,268,000 1,149,000 877,000 Total Corporation $ 5,166,000 2,427,000 1,981,000 Information on the division assets in the three regions of Lauderdale Corporation follows: Region I Region II Region III $ 718,000 648,000 1,314,500 Lauderdale Corporation has a cost of capital of 8.6 percent. Required: a. Compute residual Income for the three regions. Ignore taxes. b. How have these regions performed? 468,000 Complete this question by entering your answers in the tabs below. Required A Required B Compute residual income for the three regions. Ignore taxes. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. Residual Income Region I Region II Region III Required A Required B
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