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: Region I $1,204,000 452,000 426,000 Region II $1,654,000 812,000 636,000 Region III $2,254,000 1,142,000 856,000 Total Corporation $5,112,000 2,400,000 1,918,000 440,000 Revenues Cost of sales Selling, General and Administrative (all fixed) Corporate overhead Information on the division assets in the three regions of Lauderdale Corporation follows: $ 704,000 Region I Region II Region III 634,000 1,293,500 Lauderdale Corporation has a cost of capital of 8.6 percent.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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B8.

 

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:
Region I
$ 1,204,000
452,000
426,000
Da
Region II
$1,654,000
812,000
636,000
Region III
$2,254,000
1,142,000
856,000
Total
Corporation
$5,112,000
2,400,000
1,918,000
440,000
Revenues
Cost of sales.
Selling, General and
Administrative (all fixed)
Corporate overhead
Information on the division assets in the three regions of Lauderdale Corporation follows:
Region II
$ 704,000
Region III
Region III
634,000
1,293,500
Lauderdale Corporation has a cost of capital of 8.6 percent.
Transcribed Image Text: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: Region I $ 1,204,000 452,000 426,000 Da Region II $1,654,000 812,000 636,000 Region III $2,254,000 1,142,000 856,000 Total Corporation $5,112,000 2,400,000 1,918,000 440,000 Revenues Cost of sales. Selling, General and Administrative (all fixed) Corporate overhead Information on the division assets in the three regions of Lauderdale Corporation follows: Region II $ 704,000 Region III Region III 634,000 1,293,500 Lauderdale Corporation has a cost of capital of 8.6 percent.
a. Compute residual income for the three regions. Ignore taxes.
b. How have these regions performed?
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.
Region II
Region III
Residual Income
Region I
< Required A
Required B >
Transcribed Image Text:a. Compute residual income for the three regions. Ignore taxes. b. How have these regions performed? 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. Region II Region III Residual Income Region I < Required A Required B >
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