COST ACCOUNTING
16th Edition
ISBN: 9781323694008
Author: Horngren
Publisher: PEARSON C
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Textbook Question
Chapter 23, Problem 23.34P
- 1. Calculate ROI for each division using net book value of total assets. Required
- 2. Using the technique in Figure 23-2, compute ROI using current-cost estimates for long-term assets and
depreciation expense. The construction cost index for 2017 is 122. Estimated useful life of operational assets is 15 years. - 3. How does the choice of long-term asset valuation affect management decisions regarding new capital investments? Why might this choice be more significant to the St. Louis division manager than to the New Orleans division manager?
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Driver Sports Company makes snowboards, downhill skis, cross-country skis, skateboards, surfboards, and in-line skates. The company has found it beneficial to split operations into two divisions based on the climate required for the sport: Snow Sports and
Non-Snow Sports. The following divisional information is available for the past year:
E (Click the icon to view the information.)
Read the requirements.
Requirements
Data table
1. Calculate each division's ROI.
Sales
Operating Income
Total Assets
Current Liabilities
2. Top management has extra funds to invest. Which division will most likely
receive those funds? Why?
3. Can you explain why one division's ROI is higher? How could management gain
more insight?
Snow Sports
$ 5,300,000 $
990,000 $
4,400,000 $
400,000
Non-Snow Sports
8,400,000 $
816,000 $
3,400,000 $
650,000
Driver's management has specified a target 15% rate of return.
Print
Done
Print
Done
K
Ace Paints is a national paint manufacturer and retailer. The company is segmented into
five divisions: Paint Stores (branded retail locations), Consumer (paint sold through home
improvement stores). Automotive (sales to auto manufacturers), International, and Administration
Read the requirements
Requirement 1. Calculate each division's ROL Round all of your answers to four decimal places
Begin by selecting the formula to calculate return on investment (ROI), and then enter the amounts to calculate each division's ROI. (Round your calculations to four decimal places and enter your
antwer as a percent rounded to two decimal places, XXX%)
Requirements
1. Calculate each division's ROI. Round all of your answers to four decimal
places
2. Calculate each division's profit margin ratio. Interpret your results
3. Calculate each division's asset tumover ratio. Interpret your results
4. Use the expanded ROI formula to confirm your results from Requirement 1,
Interpret your results.
5
Calculate…
Calculate division margins in percentage terms prior to allocating fixed overhead costs.
Chapter 23 Solutions
COST ACCOUNTING
Ch. 23 - Prob. 23.1QCh. 23 - Prob. 23.2QCh. 23 - What factors affecting ROI does the DuPont method...Ch. 23 - RI is not identical to ROI, although both measures...Ch. 23 - Describe EVA.Ch. 23 - Give three definitions of investment used in...Ch. 23 - Distinguish between measuring assets based on...Ch. 23 - Prob. 23.8QCh. 23 - Why is it important to distinguish between the...Ch. 23 - Prob. 23.10Q
Ch. 23 - Managers should be rewarded only on the basis of...Ch. 23 - Explain the role of benchmarking in evaluating...Ch. 23 - Explain the incentive problems that can arise when...Ch. 23 - Prob. 23.14QCh. 23 - Prob. 23.15QCh. 23 - During the current year, a strategic business unit...Ch. 23 - Assuming an increase in price levels over time,...Ch. 23 - If ROI Is used to evaluate a managers performance...Ch. 23 - The Long Haul Trucking Company is developing...Ch. 23 - ABC Inc. desires to maintain a capital structure...Ch. 23 - ROI, comparisons of three companies. (CMA,...Ch. 23 - Prob. 23.22ECh. 23 - ROI and RI. (D. Kleespie, adapted) The Sports...Ch. 23 - ROI and RI with manufacturing costs. Excellent...Ch. 23 - ROI, RI, EVA. Hamilton Corp. is a reinsurance and...Ch. 23 - Goal incongruence and ROI. Comfy Corporation...Ch. 23 - ROI, RI, EVA. Performance Auto Company operates a...Ch. 23 - Capital budgeting, RI. Ryan Alcoa, a new associate...Ch. 23 - Prob. 23.29ECh. 23 - ROI, RI, EVA, and performance evaluation. Cora...Ch. 23 - Prob. 23.31ECh. 23 - Prob. 23.32ECh. 23 - ROI performance measures based on historical cost...Ch. 23 - ROI, measurement alternatives for performance...Ch. 23 - Multinational firms, differing risk, comparison of...Ch. 23 - ROI, Rl, DuPont method, investment decisions,...Ch. 23 - Division managers compensation, levers of control...Ch. 23 - Executive compensation, balanced scorecard. Acme...Ch. 23 - Financial and nonfinancial performance measures,...Ch. 23 - Prob. 23.40PCh. 23 - Prob. 23.41PCh. 23 - RI, EVA, measurement alternatives, goal...
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