Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Textbook Question
Chapter 10, Problem 8E
Rocky Mountain Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared:
The support department allocation rates for the support department costs were based on revenues. Because the revenues of the two divisions were the same, the support department allocations to each division were also the same.
The following additional information is available:
a. Does the operating income (loss) for the two divisions accurately measure performance? Explain.
b. Correct the divisional income statements, using appropriate support department cost drivers.
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Arlington Clothing, Inc., shows the following information for its two divisions for year 1.
Sales revenue
Cost of sales
Allocated corporate overhead
Other general and administration
Required:
a. Compute divisional operating income for the two divisions. Ignore taxes.
b-1. What are the gross margin and operating margin percentages for both divisions?
b-2. How well have these divisions performed?
Req A
Complete this question by entering your answers in the tabs below.
Operating income
Lake Region
$4,040,000
2,631,300
242,400
541,900
Req B1
stion 10- Hom...
Req B2
Compute divisional operating income for the two divisions. Ignore taxes. (Enter your answers in thousa
to 1 decimal place.)
Coastal Region
$12,950,000
6,475,000
777,000
3,743,000
Lake Region Coastal Region
Reg A
Req B1 >
< Prev
1. Allocate the support departments' costs to the operating departmens using the direct method.
2. Rank the support departments based on the % of their services provided to other support departments. Use this ranking to allocate the support departments' costs to the operating departments based on the step-down method.
3. How could you have ranked teh support departments differently?
In each blank next to the following terms, place the identifying letter of its best description.
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,...
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