am.101. Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, andassets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance.Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost ofsales).The following information is from Lauderdale's first year of operations:RevenuesCost of salesSelling, General and Administrative (allfixed)Corporate overheadRequired:Region I$ 1,203,000Region II451,500424,500$ 1,653,000811,500634,500Region III$ 2,253,0001,141,500854,500TotalCorporation$ 5,109,0002,404,5001,913,500a. Compute divisional operating income for the three regions. Ignore taxes.b. How have these regions performed?Complete this question by entering your answers in the tabs below.438,000Required A Required BCompute divisional operating Income for the three regions. Ignore taxes.Note: Do not round the "Overhead rate" value. Round your final answers to the nearest whole dollar amount.Region IRegion IIRegion IIIDivisional income

Part 2: Explanation1. Calculate the Gross Margin for each region: Gross Margin = Revenues - Cost of…

Answered: Lauderdale Corporation is organized in…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter24: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 8E: Rocky Mountain Airlines Inc. has two divisions organized as profit centers, the Passenger Division...

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Rocky Mountain Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared: The support department allocation rates for the support department costs were based on revenues. Because the revenues of the two divisions were the same, the support department allocations to each division were also the same. The following additional information is available: a.Does the operating income (loss) for the two divisions accurately measure performance? Explain. b.Correct the divisional income statements, using appropriate support department cost drivers.
Kanye Achebe just became the operations manager of Weston Transportation. Weston transports large crates for online companies and transports containers overseas. Kanye would like to evaluate each divisional manager on a basis similar to segmental reporting required by generally accepted accounting principles (GAAP) financial statements contained in annual reports. These data include a presentation of net sales, operating profit and loss before and after taxes, total identifiable assets, and depreciation for segment reported. Kanye thinks that evaluating business division managers by the same criteria as the total company is appropriate. A. Explain why you think the chief financial officer (CFO) disagrees and tells Kanye that publicly reporting information might demotivate managers. B. For better evaluation of the managers, what type of information should Kanye propose that the CFO might accept?
Service department charges In divisional income statements prepared for Demopolis Company, the Payroll Department costs are charged back to user divisions on the basis of the number of payroll distributions, and the Purchasing Department costs are charged back on the basis of the number of purchase requisitions. The Payroll Department had expenses of 64,560, and the Purchasing Department had expenses of 40,000 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: A. Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division. B. Using the cost driver information in (A), determine the annual amount of payroll and purchasing costs allocated to the Residential, Commercial, and Government Contract divisions from payroll and purchasing services. C. Why does the Residential Division have a larger support department allocation than the other two divisions, even though its sales are lower?
Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: Revenues Cost of sales Selling, General and Administrative (all fixed) Corporate overhead Required: Region I $ 1,203,000 451,500 424,500 Region II $ 1,653,000 811,500 634,500 Region III $ 2,253,000 1,141,500 854,500 Total Corporation $ 5,109,000 2,404,500 1,913,500 438,000 a. Compute divisional operating income for the three regions. Ignore taxes. b. How have these regions performed? Complete this question by entering your answers in the tabs below. Required A Required B Compute divisional operating income for the three…
Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following Information is from Lauderdale's first year of operations: Revenues Cost of sales Selling, General and Administrative (all fixed) Corporate overhead Region I $ 1,217,000 458,500 Region II $ 1,667,000 818,500 445,500 655,500 Region III $ 2,267,000 1,148,500 875,500 Total Corporation $ 5,151,000 2,425,500 1,976,500 466,000 Information on the division assets in the three regions of Lauderdale Corporation follows: Region I Region II Region III $ 717,000 647,000 1,313,000 Lauderdale Corporation has a cost of capital of 8.6 percent. The Individual regions are responsible for research and…
Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: Region I Region II $ 1,202,000 $1,652,000 451,000 811,000 1,141,000 633,000 853,000 423,000 Region I $ 702,000 Region II 632,000 Region III1,290,500 Revenues Cost of sales Selling, General and Administrative (all fixed) Corporate overhead Information on the division assets in the three regions of Lauderdale Corporation follows: Region III Total Corporation $2,252,000 $ 5,106,000 2,403,000 1,909,000 436,000 Lauderdale Corporation has a cost of capital of 8.6 percent. Required: a. Compute residual income for the three…
Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: Region I Region II Region III Total Corporation Revenues $ 1,202,000 $ 1,652,000 $ 2,252,000 $ 5,106,000 Cost of sales 451,000 811,000 1,141,000 2,403,000 Selling, General and Administrative (all fixed) 423,000 633,000 853,000 1,909,000 Corporate overhead 436,000 Information on the division assets in the three regions of Lauderdale Corporation follows: Region I $ 702,000 Region II 632,000 Region III 1,290,500 Lauderdale Corporation has a cost of capital of 8.6 percent. Required: Compute…
Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: Region I Region II Region III Total Corporation Revenues $ 1,206,000 $ 1,656,000 $ 2,256,000 $ 5,118,000 Cost of sales 453,000 813,000 1,143,000 2,409,000 Selling, General and Administrative (all fixed) 429,000 639,000 859,000 1,927,000 Corporate overhead 444,000 Information on the division assets in the three regions of Lauderdale Corporation follows: Region I $ 706,000 Region II 636,000 Region III 1,296,500 Required: Compute the division ROI for each of the three regions. How have…
Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: Region I Region II Region III Total Corporation Revenues $ 1,200,000 $ 1,650,000 $ 2,250,000 $ 5,100,000 Cost of sales 450,000 810,000 1,140,000 2,400,000 Selling, General and Administrative (all fixed) 420,000 630,000 850,000 1,900,000 Corporate overhead 432,000 Required: Compute divisional operating income for the three regions. Ignore taxes. How have these regions performed?
Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: Region I $ 1,200,000 450,000 420,000 Required A Required B Region II $ 1,650,000 810,000 630,000 Revenues Cost of sales Selling, General and Administrative (all fixed) Corporate overhead Information on the division assets in the three regions of Lauderdale Corporation follows: Region I $ 700,000 Region II Region III 630,000 1,287,500 Lauderdale Corporation has a cost of capital of 8.6 percent. Required: a. Compute residual income for the three regions. Ignore taxes. b. How have these regions performed? Complete this…
Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis of with year-end bonuses given to the divisional managers who have the highest ROIs. Operating results for the company's Office Products Division for this year are given below: Sales $22,505,000 Variable expenses 14,105,500 Contribution margin 8,399,500 Fixed expenses 6,145,000 Net operating income $2,254,500 Divisional average operating assets $4,687,500. The company had an overall return on investment () of 17.00% this year (considering all divisions). Next year the Office Products Division has an opportunity to add a new product line that would require an additional investment that would increase average operating assets by $3,261,000. The cost and revenue characteristics of the new product line per year would be: Sales $9,750,000 Variable expenses 65% of sales Fixed expenses $2,595,300. Required: Compute the Office Products Division's ROI for this year 2. Compute…
Carry On Freight Inc. has three regional divisions organized as profit centers. The chief executive officer (CEO) evaluates divisional performance using operating income as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31, 20Y3. Revenues—Air Division $ 935,800 Revenues—Rail Division 1,110,300 Revenues—Truck Division 2,025,500 Operating Expenses—Air Division 593,000 Operating Expenses—Rail Division 660,800 Operating Expenses—Truck Division 1,224,900 Corporate Expenses—Shareholder Relations 142,300 Corporate Expenses—Customer Support 517,500 Corporate Expenses—Legal 180,000 General Corporate Officers' Salaries 314,300 The company operates three service departments: Shareholder Relations, Customer Support, and Legal. The Shareholder Relations Department conducts a variety of services for shareholders of the company. The Customer Support Department is the company's point of contact for…

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