Bentler Industries provides high-technology navigation and communication equipment for the aerospace and shipbuilding industries. It is organized into two divisions, Aeronautics and Marine. The division presidents are given wide decision- making authority that covers operations, marketing, and asset acquisition and disposal. Bentler evaluates the division presidents on, among other things, ROI in their respective divisions. ROI is based on after-tax divisional income and beginning-of-year assets. Divisional income includes allocated corporate overhead. For the most recent year (year 3), data from the two divisions shows the following: Allocated corporate overhead ($000) Cost of sales Other general and administrative costs R&D costs Sales Total assets (January 1, Year 3) The tax rate applied at Bentler is 20 percent. Aeronautics Division $ 15,500 18,100 930 16,500 54,200 29,500 Marine Division $ 11,500 14, 100 1,750 3900 40,000 30,750 Problem 14-63 (Algo) Divisional Income, ROI, and Residual Income (LO 14-1, 2, 3) Required: a. Compute divisional income for year 3 for each of the divisions. b1. Evaluate the two divisions based on the information from the divisional income computed. b2. In terms of divisional income, which division performed better? c1. Compute ROI for year 3 for each of the divisions. c2. Which division performed better? d1. Compute residual income for year 3 for each of the divisions. Bentler uses a cost of capital of 12 percent. d2. Which division performed better?
Bentler Industries provides high-technology navigation and communication equipment for the aerospace and shipbuilding industries. It is organized into two divisions, Aeronautics and Marine. The division presidents are given wide decision- making authority that covers operations, marketing, and asset acquisition and disposal. Bentler evaluates the division presidents on, among other things, ROI in their respective divisions. ROI is based on after-tax divisional income and beginning-of-year assets. Divisional income includes allocated corporate overhead. For the most recent year (year 3), data from the two divisions shows the following: Allocated corporate overhead ($000) Cost of sales Other general and administrative costs R&D costs Sales Total assets (January 1, Year 3) The tax rate applied at Bentler is 20 percent. Aeronautics Division $ 15,500 18,100 930 16,500 54,200 29,500 Marine Division $ 11,500 14, 100 1,750 3900 40,000 30,750 Problem 14-63 (Algo) Divisional Income, ROI, and Residual Income (LO 14-1, 2, 3) Required: a. Compute divisional income for year 3 for each of the divisions. b1. Evaluate the two divisions based on the information from the divisional income computed. b2. In terms of divisional income, which division performed better? c1. Compute ROI for year 3 for each of the divisions. c2. Which division performed better? d1. Compute residual income for year 3 for each of the divisions. Bentler uses a cost of capital of 12 percent. d2. Which division performed better?
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter24: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 4TIF: The three divisions of Yummy Foods are Snack Goods, Cereal, and Frozen Foods. The divisions are...
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Transcribed Image Text:Bentler Industries provides high-technology navigation and communication equipment for the aerospace and shipbuilding
industries. It is organized into two divisions, Aeronautics and Marine. The division presidents are given wide decision-
making authority that covers operations, marketing, and asset acquisition and disposal. Bentler evaluates the division
presidents on, among other things, ROI in their respective divisions. ROI is based on after-tax divisional income and
beginning-of-year assets. Divisional income includes allocated corporate overhead.
For the most recent year (year 3), data from the two divisions shows the following:
Allocated corporate overhead ($000)
Cost of sales
Other general and administrative costs
R&D costs
Sales
Total assets (January 1, Year 3)
The tax rate applied at Bentler is 20 percent.
Aeronautics
Division
$ 15,500
18,100
930
16,500
54,200
29,500
Marine
Division
$ 11,500
14, 100
1,750
3900
40,000
30,750
Problem 14-63 (Algo) Divisional Income, ROI, and Residual Income (LO 14-1, 2, 3)
Required:
a. Compute divisional income for year 3 for each of the divisions.
b1. Evaluate the two divisions based on the information from the divisional income computed.
b2. In terms of divisional income, which division performed better?
c1. Compute ROI for year 3 for each of the divisions.
c2. Which division performed better?
d1. Compute residual income for year 3 for each of the divisions. Bentler uses a cost of capital of 12 percent.
d2. Which division performed better?
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