Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN: 9781337115773
Author: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 11, Problem 31E
Use 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 year’s results:
Washington’s actual cost of capital was 12%.
Exercise 11-31 Economic Value Added
Refer to the information for Washington Company above.
Required:
- 1. Calculate the EVA for the Adams Division.
- 2. Calculate the EVA for the Jefferson Division.
- 3. CONCEPTUAL CONNECTION Is each division creating or destroying wealth?
- 4. CONCEPTUAL CONNECTION Describe generally the types of actions that Washington’s management team could take to increase Jefferson Division’s EVA?
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
The Custodial Division of Clark's Corporate Services (CCS) has assets of $1.2 million. During the past year, the division had profits of
$228,000. CCS has a cost of capital of 7.5 percent. Ignore taxes.
Required:
a. Compute the divisional ROI for the Custodial Division.
b. Compute the divisional RI for the Custodial Division.
Complete this question by entering your answers in the tabs below.
Required A
Required B
Compute the divisional ROI for the Custodial Division.
Divisional ROI
%
Required A
Required B >
Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial
information (in thousands of dollars) for the first year of business follows:
Sales revenue
Income
Divisional assets (beginning of year)
Current liabilities (beginning of year)
R&D expendituresa
aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year.
Required:
a-1. Evaluate the performance of the two divisions assuming Lasky uses return on investment (ROI).
a-2. Which division had the better performance?
Complete this question by entering your answers in the tabs below.
Req A1
Divisions
Carolinas
$2,400
160
1,000
320
1,200
Req A2
Carolinas
Northeast
Evaluate the performance of the two divisions assuming Lasky uses return on investment (ROI).
Note: Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).
Northeast
$ 7,200
372
1,500
320
1,120
ROI
%
%
Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial
information (in thousands of dollars) for the first year of business follows:
Sales revenue
Income
Divisional assets (beginning of year)
Current liabilities (beginning of year)
R&D expendituresa
aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year.
Required:
a-1. Evaluate the performance of the two divisions assuming Lasky Manufacturing uses economic value added (EVA).
a-2. Which division had the better performance?
Complete this question by entering your answers in the tabs below.
Req A1
Divisions
Req A2
Carolinas
Northeast
Carolinas
$ 1,100
190
1,000
190
550
Evaluate the performance of the two divisions assuming Lasky Manufacturing uses economic value added (EVA).
Note: Note: Enter answers in thousands of dollars. Round your answers to 1 decimal place.
EVA
Chapter 11 Solutions
Managerial Accounting: The Cornerstone of Business Decision-Making
Ch. 11 - Discuss the differences between centralized and...Ch. 11 - Prob. 2DQCh. 11 - Explain why firms choose to decentralize.Ch. 11 - What are margin and turnover? Explain how these...Ch. 11 - What are the three benefits of ROI? Explain how...Ch. 11 - What is residual income? What is EVA? How does EVA...Ch. 11 - Can residual income or EVA ever be negative? What...Ch. 11 - What is transfer price?Ch. 11 - Prob. 9DQCh. 11 - (Appendix 11A) What is the Balanced Scorecard?
Ch. 11 - (Appendix 11A) Describe the four perspectives of...Ch. 11 - The practice of delegating authority to...Ch. 11 - Which of the following is not a reason for...Ch. 11 - A responsibility center in which a manager is...Ch. 11 - A responsibility center in which a manager is...Ch. 11 - If sales and average operating assets for Year 2...Ch. 11 - If sales and average operating assets for Year 2...Ch. 11 - The key difference between residual income and EVA...Ch. 11 - It ROI for a division is 15% and the company's...Ch. 11 - Prob. 9MCQCh. 11 - Prob. 10MCQCh. 11 - (Appendix 11A) Which of the following is a...Ch. 11 - (Appendix 11A) The length of time it takes to...Ch. 11 - Use the following information for Brief Exercises...Ch. 11 - Use the following information for Brief Exercises...Ch. 11 - Use the following information for Brief Exercises...Ch. 11 - Prob. 16BEACh. 11 - Use the following information for Brief Exercises...Ch. 11 - Use the following information for Brief Exercises...Ch. 11 - Use the following information for Brief Exercises...Ch. 11 - Use the following information for Brief Exercises...Ch. 11 - Prob. 21BEBCh. 11 - Calculating Transfer Price Teslum Inc. has a...Ch. 11 - Use the following information for Brief Exercises...Ch. 11 - Use the following information for Brief Exercises...Ch. 11 - Types of Responsibility Centers Consider each of...Ch. 11 - Margin, Turnover, Return on Investment Pelak...Ch. 11 - Margin, Turnover, Return on Investment, Average...Ch. 11 - Return on Investment, Margin, Turnover Data follow...Ch. 11 - Residual Income The Avila Division of Maldonado...Ch. 11 - Economic Value Added Falconer Company had net...Ch. 11 - Use the following information for Exercises 11-31...Ch. 11 - Use the following information for Exercises 11-31...Ch. 11 - Prob. 33ECh. 11 - Use the following information for Exercises 11-33...Ch. 11 - Prob. 35ECh. 11 - (Appendix 11A) Cycle Time and Velocity Prakesh...Ch. 11 - (Appendix 11A) Cycle Time and Velocity Lasker...Ch. 11 - (Appendix 11A) Manufacturing Cycle Efficiency...Ch. 11 - (Appendix 11A) Manufacturing Cycle Efficiency...Ch. 11 - Return on Investment and Investment Decisions...Ch. 11 - Return on Investment, Margin, Turnover Ready...Ch. 11 - Return on Investment for Multiple Investments,...Ch. 11 - Return on Investment and Economic Value Added...Ch. 11 - Transfer Pricing GreenWorld Inc. is a nursery...Ch. 11 - Prob. 45PCh. 11 - Prob. 46PCh. 11 - (Appendix 11A) Cycle Time, Velocity, Conversion...Ch. 11 - (Appendix 11A) Balanced Scorecard The following...Ch. 11 - (Appendix 11A) Cycle Time and Velocity,...Ch. 11 - Prob. 50C
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
- Evaluate the performance of the two divisions assuming Lasky Manufacturing uses economic value added (EVA). Note: Note: Enter answers in thousands of dollars. Round your answers to 1 decimal place.arrow_forwardA-1. Evaluate the performance of the two divisions assuming BMI users return on investment (ROI). A-2. Which division had the better performance?arrow_forwardAlpesharrow_forward
- Memanarrow_forwardRequired information Use the following information for the Problems below: The following data pertain to three divisions of Nevada Aggregates, Incorporated. The company's required rate of return on invested capital is 8 percent. Sales revenue Income Average investment Sales margin Capital turnover ROI Residual income Sales revenue Income Average investment Sales margin Capital turnover ROI Residual income Division A ? $ 580,000 7 20% $ Division A 1,770,000 Required: The following data pertain to three divisions of Nevada Aggregates, Incorporated. The company's required rate of return on invested capital is 8 percent. Note: Round "Capital turnover" answers to 2 decimal places. 20 % 1.00 % Division B $ 11,000,000 $ 2,040,000 $ 2,630,000 $ $ $ Division B 41,700,000 8,340,000 10,425,000 % ? % Division C $ 7 25% ? 30% $ 132,000 Division C 25 % 20% 516,000arrow_forwardA-1. Evaluate the performance of the two divisions assuming BMI uses economic value added (EVA). A-2. Which division had the better performance?arrow_forward
- Required information Use the following information for the Problems below: The following data pertain to three divisions of Nevada Aggregates, Incorporated. The company's required rate o on invested capital is 8 percent. Sales revenue Income Average investment Sales margin Capital turnover ROI Residual income Sales revenue Income Average investment Sales margin Capital turnover ROI Residual income Division A ? $ 440,000 ? 40% 2 ? ? Division A $ 8,150,000 $ 1,630,000 $ 8,150,000 20 % 1.00 $ 978,000 20% Required: The following data pertain to three divisions of Nevada Aggregates, Incorporated. The company's required rate of return capital is 8 percent. Note: Round "Capital turnover" answers to 2 decimal places. $ $ $ Division B $ 10,000,000 $ 2,160,000 $ 2,600,000 $ Division B 40,300,000 8,866,000 10,075,000 22 % 4.00 88 % ? ? ? 8,060,000 Division C ? $ ? ? 45% ? 40% $ 139,000 Division C 25 % 20 % 471,000arrow_forwardA. Compute the divisional ROI for the Campus Division. B. Compute the divisional RI for the Campus Division.arrow_forwardanswer must be in table format or i will give down votearrow_forward
- Memanarrow_forwardA-1. Evaluate the performance of the two divisions assuming BMI uses residual income. A-2. Which division had the better performance?arrow_forward(J) Please answer Asap.... Glory limited has two divisions x and y. each with its own cost and revenue streams. each division is managed by a divisional manager who has the power to make all investment decisions within the division. the cost of capital for both division is 15 percent. historically, investment decisions have been made by calculating the return on investment (ROI) of any opportunities and presently the return on investment of each division is 18 percent A recently appointed manager for division x strongly feels that using residual income to make investment decisions would result in better goal congruence throughout the organization. Each division is currently considering the following separate investments: capital required for the investment division x, 88.2m and division y, 46m revenue generated from investment: division x, 46.4m and division y, 28.1m net profit margin: division x, 36% and division y, 35% required:determine both the…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Profitability index; Author: The Finance Storyteller;https://www.youtube.com/watch?v=Md5ocNqKHq8;License: Standard Youtube License