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
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Textbook Question
Chapter 11, Problem 8MCQ
It ROI for a division is 15% and the company's minimum required cost of capital is 18%, then
- a. residual income for the division is negative.
- b. residual income for the division takes on a value between 0 and +1.
- c. residual income cannot be computed.
- d. EVA must be negative.
- e. residual income is positive.
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Students have asked these similar questions
B. Calculate the profit margin, return on investment, and residual income. Assume an investment base of $100,000 and 6% cost of capital. Round your
percentage answers to one decimal place.
Profit margin
Return on investment
Residual income
2.20
a
✓ %
4.2 ✓ %
C. Which of the following statements is correct? Uncontrollable costs are included in the income statement because
a. these costs ultimately affect each division.
b. these costs are the responsibility of each division manager.
c. these costs are non-recurring.
d. these costs are head office's responsibility.
Before a company reaches the breakeven point
Select one:
a. The fixed cost is equal to zero
b. The contribution margin ratio is negative
c. Total fixed costs are increasing
d. The total contribution margin is negative
e. The contribution margin per unit is less
than the fixed costs per unit
3. If management desires a minimum acceptable return on investment of 10%, determine the residual income for each division.
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
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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
- Before a company reaches the breakeven point Select one: a. The variable cost is decreasing Ob. The total contribution margin is negative c. The total operating income is negative Od. The contribution margin per unit is higher than the fixed costs per unit Oe. The fixxed cost is equal to zero Ne 0000 llinnarrow_forwardAssume that the firm whose cost structure is depicted in the figure expects to produce a loss for the upcoming period. The loss would be shown on the graph: by the area diagonally to the right of the break-even point. in some other area not mentioned above. by the area immediately above the break-even point. by the area immediately below the total cost line. by the area diagonally to the left of the break-even point.arrow_forwardData are as follows: Average total assets is 8,000,000; Sales is 12,000,000; Variable cost is 8,000,000 and Fixed cost-controllable is 1,000,000, while common cost is 1,000,000. What is the residual income if Cost of capital is 12% (in order to properly measure the performance of the segment’s manager)? • 1,040,000 • 2,000,000 • 3,040,000 • 1,550,000 • None of the abovearrow_forward
- Please Do not Give Image formatarrow_forwardWhich of the following is not an assumption of break-even analysis? a. A company is operating within its relevant range of activity. b. All costs are either variable or fixed. c. Revenues and variable costs are constant per unit. d. Contribution margin is the difference between selling price and total cost per unit. e. Fixed cost per unit decreases as volume increases.arrow_forwarda. Compute ROI for Division A.b. Compute residual income for Division B.c. Division A could increase its profit by $40,000 by increasing its investment by $150,000. Computeits total residual income.d. Division A could increase its return on sales by one percentage point, while keeping the same totalsales and investment. Compute its ROI.e. Division B could reduce its investment so that its asset turnover increased by one time, whileholding total sales constant. Compute its ROI.arrow_forward
- Tan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Osaka Yokohama $ 10,600,000 $ 36,000,e00 24 742,000 $ 3,240,000 2$ 2,650,000 Sales Net operating income Average operating assets $ 18,000,000 Required: 1. 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 16%. Compute the residual income for each division. Complete this question by entering your answers in the tabs below. Required 1 Required 2 For each division, compute the return on investment (ROI) in terms of margin and turnover. 7:32 PM 4/15/2021 o searcharrow_forwardHow much would be the net effect on the total segment profit if product B is dropped and discontinued? Assume that by dropping product B, product A would increase A's sales by 80%. How much would be the net effect on the total segment profit? Assume that by dropping product B, product A would decrease A's sales by 20%. Moreover, 30,000 of common costs allocated are avoidable. How much would be the net effect on the total segment profit?arrow_forwardSee questions 6A-6C in image Question 6D: Using the residual income approach, if you were in Dell Havasi’s position, would you accept or reject the new product line?arrow_forward
- 3. A company has different output levels, and incurs different total production costs at each level, as follows. Total Costs Output (units) 6,000 8,000 44,700 57,700 c) If the selling price is SXX/unit at all levels, what is the B.E.P.? d) What is the breakeven revenue?arrow_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_forwardSelected 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_forward
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