Financial and Managerial Accounting
15th Edition
ISBN: 9780357297162
Author: Carl S. Warren; Jefferson P. Jones; William B. Tayler, Ph.D., CMA
Publisher: Cengage Learning US
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 24, Problem 3MAD
Papa John’s International, Inc. (PZZA), operates over 5,000 restaurants in the United States and 45 countries. The company operates primarily as a franchisor with 4,353 franchised restaurants and 744 company-operated restaurants. Recent data (in millions) for the company-operated and North America franchised restaurants are as follows:
- a. Determine the profit margin for each segment. Round to one decimal place.
- b. Determine the investment turnover for each segment. Round to two decimal places.
- c. Use the DuPont formula to determine the
return on investment for each segment. Round to one decimal place. - d.
Analyze and interpret the results of (a), (b), and (c).
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Giardin Outdoors is a recreational goods retailer with two divisions: Online and Stores. The two divisions both use the services of the corporate Finance and Accounting (F and A) Department. Annual costs of the F and A Department total $5.230 million a year. Managers in the two operating divisions are measured based on division operating profits.
The following selected data are available for the two operating divisions:
Revenues($000)
Transactions(000)
Online
$ 75,300
1,366.5
Stores
41,100
433.5
Required:
What is the F and A cost that is charged to each division if divisional revenues are used as the allocation basis?
What is the F and A cost that is charged to each division if the the number of transactions is used as the allocation basis?
[The following information applies to the questions displayed below.]
A food manufacturer reports the following for two of its divisions for a recent year.
Beverage
Cheese
($ millions)
Division
Division
Invested assets, beginning
Invested assets, ending
$2,676
2,600
2,688
$4,469
4,407
3,932
641
Sales
Operating income
356
Assume that each of the company's divisions has a required rate of return of 7%. Compute residual income for each division. (Enter
your answers in millions.)
($ millions)
Beverage
Cheese
Targeted return
Target income
Residual Income
Beverage
Cheese
Residual income
Owen's Electronics has nine operating plants in seven southwestern states. Sales for last year were $100 million, and the balance
sheet at year-end is similar in percentage of sales to that of previous years (and this will continue in the future). All assets (including
fixed assets) and current liabilities will vary directly with sales. The firm is working at full capacity.
Assets
Cash
Accounts receivable
Inventory
Current assets
Fixed assets
Total assets
Balance Sheet
(in $ millions)
Liabilities and Stockholders' Equity
$ 2 Accounts payable
22
24
$ 48
43
Accrued wages
Accrued taxes
Current liabilities
Notes payable
Common stock
Retained earnings
$91 Total liabilities and stockholders' equity
$ 16
4
10
$30
Answer is complete but not entirely correct.
New funds
$ 8,075,000 >
12
17
32
$ 91
Owen's Electronics has an aftertax profit margin of 6 percent and a dividend payout ratio of 45 percent.
If sales grow by 20 percent next year, determine how many dollars of new funds are needed to…
Chapter 24 Solutions
Financial and Managerial Accounting
Ch. 24 - Differentiate between centralized and...Ch. 24 - Differentiate between a profit center and an...Ch. 24 - Weyerhaeuser Co. (WY) developed a system that...Ch. 24 - What is the major shortcoming of using operating...Ch. 24 - In a decentralized company in which the divisions...Ch. 24 - Prob. 6DQCh. 24 - (a) Explain how return on investment might lead a...Ch. 24 - Prob. 8DQCh. 24 - When is the negotiated price approach preferred...Ch. 24 - Prob. 10DQ
Ch. 24 - Budgetary performance for cost center Vinton...Ch. 24 - Support department allocations The centralized...Ch. 24 - Prob. 3BECh. 24 - Profit margin, investment turnover, and ROI Briggs...Ch. 24 - Residual income Obj. The Commercial Division of...Ch. 24 - Transfer pricing The materials used by the...Ch. 24 - Budget performance reports for cost centers...Ch. 24 - The following data were summarized from the...Ch. 24 - Prob. 3ECh. 24 - Prob. 4ECh. 24 - Service department charges In divisional income...Ch. 24 - Varney Corporation, a manufacturer of electronics...Ch. 24 - Horton Technology has two divisions, Consumer and...Ch. 24 - Rocky Mountain Airlines Inc. has two divisions...Ch. 24 - Championship Sports Inc. operates two divisionsthe...Ch. 24 - The operating income and the amount of invested...Ch. 24 - The operating income and the amount of invested...Ch. 24 - Prob. 12ECh. 24 - The condensed income statement for the Consumer...Ch. 24 - Prob. 14ECh. 24 - Data are presented in the following table of...Ch. 24 - Prob. 16ECh. 24 - Materials used by the Instrument Division of...Ch. 24 - Prob. 18ECh. 24 - GHT Tech Inc. sells electronics over the Internet....Ch. 24 - Profit center responsibility reporting for a...Ch. 24 - Divisional income statements and return on...Ch. 24 - Effect of proposals on divisional performance A...Ch. 24 - Divisional performance analysis and evaluation The...Ch. 24 - Prob. 6PACh. 24 - Budget performance report for a cost center The...Ch. 24 - Profit center responsibility reporting for a...Ch. 24 - Divisional income statements and return on...Ch. 24 - Effect of proposals on divisional performance A...Ch. 24 - Prob. 5PBCh. 24 - Prob. 6PBCh. 24 - Kelly Kitchens operates both franchised and...Ch. 24 - Panera Bread Company (PNRA) operates over 2,000...Ch. 24 - Papa Johns International, Inc. (PZZA), operates...Ch. 24 - Panera Bread Company (PNRA) operates over 2,000...Ch. 24 - McDonalds Corporation (MCD) operates company-owned...Ch. 24 - Prob. 1TIFCh. 24 - Prob. 2TIFCh. 24 - Communication The Norse Division of Gridiron...Ch. 24 - The three divisions of Yummy Foods are Snack...Ch. 24 - Last Resort Industries Inc. is a privately held...Ch. 24 - Sara Bellows, manager of the telecommunication...Ch. 24 - Most firms allocate corporate and other support...Ch. 24 - Prob. 3CMACh. 24 - Prob. 4CMA
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
- Xenold, Inc., manufactures and sells cooktops and ovens through three divisions: Home, Restaurant, and Specialty. Each division is evaluated as a profit center. Data for each division for last year are as follows (numbers in thousands): The income tax rate for Xenold, Inc., is 40 percent. Xenold, Inc., has two sources of financing: bonds paying 5 percent interest, which account for 25 percent of total investment, and equity accounting for the remaining 75 percent of total investment. Xenold, Inc., has been in business for over 15 years and is considered a relatively stable stock, despite its link to the cyclical construction industry. As a result, Xenold stock has an opportunity cost of 5 percent over the 4 percent long-term government bond rate. Xenolds total capital employed is 5.04 million (2,600,000 for the Home Division, 1,700,000 for the Restaurant Division, and the remainder for the Specialty Division). Required: 1. Prepare a segmented income statement for Xenold, Inc., for last year. 2. Calculate Xenolds weighted average cost of capital. (Round to four significant digits.) 3. Calculate EVA for each division and for Xenold, Inc. 4. Comment on the performance of each of the divisions.arrow_forwardPanera Bread Company (PNRA) operates over 2,000 bakery-cafe locations throughout the United States and Canada and serves over 9 million customers per week. Paneras operations are divided into the following segments: Company-Operated Bakery-Cafes Franchised Bakery-Cafes Fresh Dough and Other Products The Fresh Dough and Other Products segment supplies fresh dough, produce, tuna, and other products to the company-operated and franchised cafes. Recent data (in millions) for each of these segments are as follows: a. Determine the profit margin for each segment. Round to one decimal place. b. Determine the investment turnover for each segment. Round to two decimal places. c. Use the DuPont formula to determine the return on investment for each segment. Round to one decimal place. d. Which segment has the highest profit margin, investment turnover, and return on investment? Explain why. e. If franchised cafes are more profitable, why would Panera operate company- owned cafes? MAD 24-3 Analyze Papa Johns International, Inc.Obj. 6 Papa Johns International, Inc. (PZZA), operates over 5,000 restaurants in the United States and 45 countries. The company operates primarily as a franchisor with 4,353 franchised restaurants and 744 company-operated restaurants. Recent data (in millions) for the company-operated and North America franchised restaurants are as follows: a. Determine the profit margin for each segment. Round to one decimal place. b. Determine the investment turnover for each segment. Round to two decimal places. c. Use the DuPont formula to determine the return on investment for each segment. Round to one decimal place. d. Analyze and interpret the results of (a), (b), and (c). MAD 24-4 Compare Panera Bread and Papa JohnsObj. 6 Compare Panera Bread (PNRA) and Papa Johns (PZZA) using your computations from MAD 24-2 and MAD 24-3.arrow_forwardForchen, Inc., provided the following information for two of its divisions for last year: Required: 1. For the Small Appliances Division, calculate: a. Average operating assets b. Margin c. Turnover d. Return on investment (ROI) 2. For the Cleaning Products Division, calculate: a. Average operating assets b. Margin c. Turnover d. Return on investment (ROI) 3. What if operating income for the Small Appliances Division was 2,000,000? How would that affect average operating assets? Margin? Turnover? ROI? Calculate any changed ratios (round to four significant digits).arrow_forward
- The Walt Disney Company (DIS) has four business segments, described as follows: Media Networks: Television and radio Parks and Resorts: Resorts, including Disneyland Studio Entertainment: Motion pictures, musical recordings, and stage plays Consumer Products Interactive Media: Character merchandising, Disney stores, books, and games Disney recently reported segment operating income, revenue, and invested assets (in millions) as follows: a. Use the DuPont formula to determine the return on investment for the four Disney segments. Round percentages to one decimal place and investment turnover to two decimal places. b. How do the four segments differ in their profit margin, investment turnover, and return on investment?arrow_forwardSher Manufacturing Pty Ltd has two retail divisions., which have the following reported results for the year: (i) Calculate the ROI for both divisions (ii) Calculate residual income assuming the firm requires a return of 18% on invested capital (iii) Which was the more successful division? Explain. (Hint: think carefully about this) (b) Giratina is a retailer and is a division of a larger retail company. The following data relate to the most recent year of operations: Furnishing department Dress making Division Profit $2,160,000 $441,000 Average invested Capital 12,000,000 2,100,000 Sales Revenue $9,000,000 Cost of Goods Sold 4,950,000 Operating Expenses 3,600,000 Average Invested Capital 4,500,000 (i) Calculate the division’s return on sales, investment turnover and return on investment. (ii) Describe how the division improve its ROI. (hint issue the 2 component ratios to explainarrow_forwardBrutus is a division of Madam Medusa's Pawn Shop/Boutique, Inc. Last year, the division generated operating income of $609,840 and sales revenue of $10,890,000. The division had invested capital of $3,000,000. Using only the information given, which of the following statements is correct? O A. For every dollar of sales revenue generated, $0.56 of income is earned. B. If the division's manager is evaluated based on maintaining the division's current Return on Investment, he would accept an investment opportunity that would yield a return of 18%. C. For every dollar of capital invested, $0.20 of income is earned. D. For every dollar of capital invested, $3.63 of income is earned. O E. If the company's hurdle rate is less than 20%, the residual income for Brutus is negative.arrow_forward
- Noble Company has two divisions, the Domestic Division and the International Division. Last year, the Domestic Division earned $360,000 using average operating assets of $1,440,000. Sales for the Domestic Division were $3,600,000. Last year, the International Division earned $560,000 using average operating assets of $2,800,000. Sales for the International Division were $7,000,000. A. For the Domestic Division, margin is __________________ Turnover is __________________ and ROI is __________________. B. For the International Division, margin is __________________ Turnover is __________________ and ROI is __________________. C. If these are the only two divisions of Noble Company, what is ROI for Noble Company?arrow_forwardTerra Company has two divisions, the Retail Division and the Wholesale Division. The following information was gathered for the two divisions for the current year: Operating income Operating assets Retail Division $ 7,200,000 $37,200,000 Wholesale Division $ 3,700,000 $17,200,000 Assuming that these are the only divisions of Terra Company, what is the ROI for the company as a whole?arrow_forwardThe following is partial information for Charleston Company’s most recent year of operation. It manufactures lawn mowers and categorizes its operations into two divisions: Bermuda and Midiron. Bermuda Division Midiron Division Sales revenue ? $ 600,000 Average invested assets $ 2,500,000 ? Net operating income $ 160,000 $ 150,000 Profit margin 20 % ? Investment turnover ? 0.16 Return on investment ? ? Residual income $ 40,000 $ (30,000 ) Required:1. Without making any calculations, determine whether each division’s return on investment is above or below Charleston’s hurdle rate.2. Determine the missing amounts in the preceding table.3. What is Charleston’s hurdle rate?4-a. Suppose Charleston has the opportunity to invest additional assets to help expand the company’s market share. The expansion would require an average investment of $2,800,000 and would generate $140,000 in additional income. Calculate…arrow_forward
- The Crunchy Granola Company is a diversified food company that specializes in all natural foods. The company has three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y7, are as follows: Cereal Division Snack Cake Division Retail Bakeries Division Sales $25,900,000 $8,100,000 $9,800,000 Cost of goods sold 16,620,000 5,560,000 6,700,000 Operating expenses 7,726,000 1,973,000 2,414,000 Invested assets 10,360,000 2,025,000 6,533,333 The management of The Crunchy Granola Company is evaluating each division as a basis for planning a future expansion of operations. Required: 1. Prepare condensed divisional income statements for the three divisions, assuming that there were no service department charges. 2. Using the DuPont formula for return on investment, compute the profit margin, investment turnover, and return on investment for each division. If…arrow_forwardSamsun company operates with two divisions, sam and sun. The results of the operations last year showed the company earning a net operating income of P468,000 while allocating P1,040,000 ccommon fixed expenses. The contribution margin of Sam was P780,000 while contribution margin ratio for sun ws 40%. Sun was able to generate sales of P3,250,000, and its segment margin was P832,000. The segment margin for sam was: A. P676,000 B. 1,508,000 C. P208,000 D. P832,000arrow_forwardLasky 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) RAD expenditures Carolinas $1,600 160 1,000 240 800 Northeast $5,500 Complete this question by entering your answers in the tabs below. 432 1,500 240 720 R&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?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 Pub
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher: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,
Financial Accounting
Accounting
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
How To Analyze an Income Statement; Author: Daniel Pronk;https://www.youtube.com/watch?v=uVHGgSXtQmE;License: Standard Youtube License