Exercise 10.7 ROI, Margin, Turnover Jarriot, Ic., presented two years of data for its Furniture Division and its Houseware Division. Furniture Division: Year 1 Year 2 Sales S35,000,000 1,400,000 S37,500,000 1,500,000 Operating income Average operating assets 10,000,000 10,000,000 Houseware Division: Year 1 Year 2 Sales S12,000,000 S12,500,000 Operating income Average operating assets 600,000 5,000,000 500,000 5,000,000
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Required:
1. Compute the ROI and the margin and turnover ratios for each year for the Furniture
Division. (Round your answers to four significant digits.)
2. Compute the ROI and the margin and turnover ratios for each year for the Houseware
Division. (Round your answers to four significant digits.)
3. Explain the change in ROI from Year 1 to Year 2 for each division.
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