Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 10, Problem 11E
The operating income and the amount of invested assets in each division of Conley Industries are as follows:
a. Compute the
b. Which division is the most profitable per dollar invested?
Based on the data in Exercise 10 assume that management has established a 15% minimum acceptable return for invested assets.
a. Determine the residual income for each division.
b. Which division has the most residual income?
Expert Solution & Answer
![Check Mark](/static/check-mark.png)
Want to see the full answer?
Check out a sample textbook solution![Blurred answer](/static/blurred-answer.jpg)
Students have asked these similar questions
a. Compute the rate of return on investment for each division. b. Which division is the most profitable per dollar invested?
Assume that management has established a 10% minimum acceptable rate of return for invested assets.
c. Determine the residual income for each division. d. Which division has the most residual income?
The operating income and the amount of invested assets in each division of Conley Industries are as follows:
Retail Division
Commercial Division
Internet Division
Operating income
Invested Assets
$160,600
$730,000
120,000
600,000
124,200
690,000
Assume that management has established a 8% minimum acceptable return for invested assets.
a. Determine the residual income for each division.
Operating income
Minimum acceptable operating income as a percent of invested assets
Residual income
b. Which division has the most residual income?
Retail Division
Retail Division
Commercial Division
Internet Division
$160,600
$120,000
$124,200
The operating income and the amount of invested assets in each division of Conley Industries are as follows:
Operating income
Invested Assets
Retail Division
$123,900
$590,000
Commercial Division
182,400
760,000
Internet Division
137,800
530,000
Assume that management has established a 12% minimum acceptable return for invested assets.
a. Determine the residual income for each division.
Retail Division
Commercial Division
Internet Division
Operating income
$123,900
$182,400
$137,800
Minimum acceptable operating income as a percent of invested assets
Residual income
$
$
$
b. Which division has the most residual income?
Chapter 10 Solutions
Managerial Accounting
Ch. 10 - Differentiate between centralized and...Ch. 10 - Differentiate between a profit center and an...Ch. 10 - Prob. 3DQCh. 10 - What is the major shortcoming of using operating...Ch. 10 - In a decentralized company in which the divisions...Ch. 10 - How does using the return on investment facilitate...Ch. 10 - (a) Explain how return on investment might lead a...Ch. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - When using the negotiated price approach to...
Ch. 10 - Budgetary performance for cost center Vinton...Ch. 10 - Support department allocations The centralized...Ch. 10 - Prob. 3BECh. 10 - Profit margin, investment turnover, and ROI Briggs...Ch. 10 - Residual income The Commercial Division of Galena...Ch. 10 - Prob. 6BECh. 10 - Budget performance reports for cost centers...Ch. 10 - The following data were summarized from the...Ch. 10 - For each of the following support departments,...Ch. 10 - Prob. 4ECh. 10 - Service department charges In divisional income...Ch. 10 - Varney Corporation, a manufacturer of electronics...Ch. 10 - Horton Technology has two divisions, Consumer and...Ch. 10 - Rocky Mountain Airlines Inc. has two divisions...Ch. 10 - Championship Sports Inc. operates two divisionsthe...Ch. 10 - Prob. 10ECh. 10 - The operating income and the amount of invested...Ch. 10 - Prob. 12ECh. 10 - The condensed income statement for the Consumer...Ch. 10 - The Walt Disney Company (DIS) has four business...Ch. 10 - Prob. 15ECh. 10 - Prob. 16ECh. 10 - Materials used by the Instrument Division of...Ch. 10 - Prob. 18ECh. 10 - GHT Tech Inc. sells electronics over the Internet....Ch. 10 - Profit center responsibility reporting for a...Ch. 10 - Prob. 3PACh. 10 - Effect of proposals on divisional performance A...Ch. 10 - Divisional performance analysis and evaluation The...Ch. 10 - Prob. 6PACh. 10 - Prob. 1PBCh. 10 - Prob. 2PBCh. 10 - Prob. 3PBCh. 10 - Prob. 4PBCh. 10 - Divisional performance analysis and evaluation The...Ch. 10 - Prob. 6PBCh. 10 - Prob. 1MADCh. 10 - Prob. 2MADCh. 10 - Papa Johns International, Inc. (PZZA), operates...Ch. 10 - Panera Bread Company (PNRA) operates over 2,000...Ch. 10 - Prob. 5MADCh. 10 - Prob. 1TIFCh. 10 - Prob. 2TIFCh. 10 - Prob. 3TIFCh. 10 - The three divisions of Yummy Foods are Snack...Ch. 10 - Prob. 5TIFCh. 10 - Prob. 1CMACh. 10 - Prob. 2CMACh. 10 - Prob. 3CMACh. 10 - Morrisons Plastics Division, a profit center,...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- The following selected data pertain to the Argent Division for last year: Required: 1. How much is the residual income? 2. How much is the return on investment? (Rounded to four significant digits.)arrow_forwardUse the following information for Exercises 11-31 and 11-32: Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last years results: Washingtons actual cost of capital was 12%. Exercise 11-32 Residual Income Refer to the information for Washington Company above. In addition, Washington Companys top management has set a minimum acceptable rate of return equal to 8%. Required: 1. Calculate the residual income for the Adams Division. 2. Calculate the residual income for the Jefferson Division.arrow_forwardThe income from operations and the amount of invested assets in each division of Beck Industries are as follows: Income from Operations Invested Assets Retail Division $96,900 510,000 Commercial Division 64,600 380,000 Internet Division 141,600 590,000 Assume that management has established a 8% minimum acceptable return for invested assets. a. Determine the residual income for each division. Retail Division Commercial Division Internet Division Income from operations $96,900 $64,600 $141,600 Minimum acceptable of income from operations Residual income b. Which division has the most residual income? Internet Divisionarrow_forward
- Selected sales and operating data for three divisions of different structural engineering firms are given as follows: 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 7% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? Division A Division B Division C Sales $ 15,950,000 $ 28,760,000 $ 25,950,000 Average operating assets $ 3,190,000 $ 7,190,000 $ 5,190,000 Net operating income $ 733,700 $ 373,880 $ 752,550 Minimum required rate of return 6.00 % 6.50 % 14.50 %arrow_forward3. If management desires a minimum acceptable return on investment of 10%, determine the residual income for each division.arrow_forwardThe income from operations and the amount of invested assets in each division of Beck Industries are as follows: Income from Operations Invested Assets Retail Division $126,000 $630,000 Commercial Division 126,000 700,000 Internet Division 105,000 700,000 Assume that management has established a 10% minimum acceptable return for invested assets. a. Determine the residual income for each division. Retail Division Commercial Division Internet Division Income from operations $126,000 $126,000 $105,000 Minimum acceptable income from operations as a percent of invested assets fill in the blank 1 fill in the blank 2 fill in the blank 3 Residual income $fill in the blank 4 $fill in the blank 5 $fill in the blank 6arrow_forward
- A company's division has sales of $2,610,000, income of $991,800, and average assets of $1,800,000. Compute the division's profit margin, return on investment, and investment turnover. Compute the Division's Profit Margin. Numerator: Denominator: Profit Margin Profit margin Compute the Division's Return on investment. Numerator: Denominator: Return on investment Return on investment Compute the Division's Investment Turnover. Numerator: Denominator: Investment Turnover %3D Investment turnoverarrow_forwardThe sales, income from operations, and invested assets for each division of Wren Company are as follows: Sales Income from Operations Invested Assets Division C $5,000,000 $630,000 $4,000,000 Division D 6,800,000 760,000 3,900,000 Division E 3,750,000 750,000 7,500,000 Management has established a minimum rate of return for invested assets of 10%. What is the Residual Income for Division C? What is the Residual Income for Division D? What is the Residual Income for Division E? Based on Residual Income, Division __?__ is the most profitable.arrow_forwardWhich of the following statements is true? Suppose a company evaluates divisional performance using both ROI and residual income. The company's minimum required rate of return for the purposes of residual income calculations is 12%. If a division has a residual income of $6,000, then its ROI is less than 12%. If a company contains a number of investment centers of differing sizes, return on investment (ROI) should be used rather than residual income to rank the financial performance of the divisions. ROI and residual income are tools used to evaluate managerial performance in investment centers.arrow_forward
- Please help mearrow_forward1. For each division, compute the return on investment (ROI) in terms of margin and turnover. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 12%. Compute the residual income for each division. 3. Is Yokohama's greater amount of residual income an indication that it is better managed?arrow_forwardThe following data are available for Segment X of XYZ Company: Net income of the segment $50,000 Contribution to indirect expenses 40,000 Controllable income by manager 48,000 Assets directly used by the manager 360,000 Assets under the control of the segment 240,000 manager Determine the return on investment for evaluating 1. the income performance of the manager of Segment X and 2. the rate of income contribution of the segment. Answer:arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubSurvey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage LearningFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
- Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningCornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337912020/9781337912020_smallCoverImage.jpg)
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
![Text book image](https://www.bartleby.com/isbn_cover_images/9781305961883/9781305961883_smallCoverImage.gif)
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337902663/9781337902663_smallCoverImage.jpg)
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337115773/9781337115773_smallCoverImage.gif)
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
![Text book image](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Introduction to Divisional performance measurement - ACCA Performance Management (PM); Author: OpenTuition;https://www.youtube.com/watch?v=pk8Mzoqr4VA;License: Standard Youtube License