Operations of Borderland Oil Drilling Services are separated into two geographical divisions: United States and Mexico. The operating results of each division for the year are as follows: United States Mexico Total Sales $7,200,000 $3,600,000 $10,800,000 Variable costs (4,740,000) (2,088,000) (6,828,000) Contribution margin $2,460,000 $1,512,000 $3,972,000 Direct fixed costs (800,000) (490,000) (1,290,000) Segment margin $1,660,000 $1,022,000 $2, 682,000 Corporate fixed costs (1,900,000) (890, 000) (2,790,000) Operating income (loss) S(240,000) $132,000 S (108,000) Corporate fixed costs are allocated to the divisions based on relative sales. Assume that all of a division's direct fixed costs could be avoided by eliminating that division. Because the U.S. division is operating at a loss, Borderland's president is considering eliminating it. a. If the U.S. division had been eliminated at the beginning of the year, what would have been Borderland's pre- tax income? S Answer b. Recast the income statements into a more meaningful format than the one given. Note: Use a negative sign for expenses and losses.

Operations of Borderland Oil Drilling Services are separated into two geographical divisions: United States and Mexico. The operating results of each division for the year are as follows: United States Mexico Total Sales $7,200,000 $3,600,000 $10,800,000 Variable costs (4,740,000) (2,088,000) (6,828,000) Contribution margin $2,460,000 $1,512,000 $3,972,000 Direct fixed costs (800,000) (490,000) (1,290,000) Segment margin $1,660,000 $1,022,000 $2, 682,000 Corporate fixed costs (1,900,000) (890, 000) (2,790,000) Operating income (loss) S(240,000) $132,000 S (108,000) Corporate fixed costs are allocated to the divisions based on relative sales. Assume that all of a division's direct fixed costs could be avoided by eliminating that division. Because the U.S. division is operating at a loss, Borderland's president is considering eliminating it. a. If the U.S. division had been eliminated at the beginning of the year, what would have been Borderland's pre- tax income? S Answer b. Recast the income statements into a more meaningful format than the one given. Note: Use a negative sign for expenses and losses.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter11: Performance Evaluation And Decentralization

Section: Chapter Questions

Problem 32E: Use the following information for Exercises 11-31 and 11-32: Washington Company has two divisions:...

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Product lineOperations of Borderland Oil Drilling Services are separated into two geographical divisions: United States and Mexico. The operating results of each division for the year are as follows: United States Mexico Total Sales $10,080,000 $5,040,000 $15,120,000 Variable costs (6,636,000) (2,923,200) (9,559,200) Contribution margin $3,444,000 $2,116,800 $5,560,800 Direct fixed costs (1,120,000) (686,000) (1,806,000) Segment margin $2,324,000 $1,430,800 $3,754,800 Corporate fixed costs (2,660,000) (1,246,000) (3,906,000) Operating income (loss) $(336,000) $184,800 $(151,200) Corporate fixed costs are allocated to the divisions based on relative sales. Assume that all of a division’s direct fixed costs could be avoided by eliminating that division. Because the U.S. division is operating at a loss, Borderland’s president is considering eliminating it.a. If the U.S. division had been eliminated at the beginning of the year, what would have been Borderland’s…
Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A Division B Division C Sales $ 15,400,000 $ 28,320,000 $ 25,400,000 Average operating assets $ 3,080,000 $ 7,080,000 $ 5,080,000 Net operating income $ 693,000 $ 396,480 $ 736,600 Minimum required rate of return 7.00 % 7.50 % 14.50 % Required: 1. Compute the margin, turnover, and return on investment (ROI) for each division. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 8% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept the opportunity?
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Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below: Division Queensland New South Wales Sales $ 855,000 $ 2,200,000 Average operating assets $ 570,000 $ 550,000 Net operating income $ 44,460 $ 48,400 Property, plant, and equipment (net) $ 244,000 $ 194,000 Required: 1. Compute the rate of return for each division using the return on investment (ROI) formula stated in terms of margin and turnover. 2. Which divisional manager seems to be doing the better job?
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Selected operating data for two divisions of Outback Brewing, Limited, of Australia are given below: Sales Average operating assets Queensland $ 1,984,000 $ 620,000 $ 148,800 Division New South Wales $ 2,907,000 $ 570,000 Net operating income $ 145,350 Property, plant, and equipment (net) $ 262,000 $ 212,000 Required: 1. Compute each division's margin, turnover, and return on investment (ROI). 2. Which divisional manager is doing the better job? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute each division's margin, turnover, and return on investment (ROI). Note: Round your answers to 2 decimal places. Queensland division New South Wales division Margin Turnover ROI % % % % Required 2 >
Cat Company produces products C, A, and T from a joint production process. Each product may be sold at the split-off point or be processed further. Joint production costs of $75,000 per year are allocated to the products based on the relative number of units produced. Data for Cat's operations for the current year are as follows: Units Allocated Joint Sales Value Product Produced Production Cost At Split-off C 12,000 $23,000 $80,000 A 8,000 34,000 71,000 T 13,000 18,000 51,000 Product C can be processed beyond the split-off point for an additional cost of $29,000 and can then be sold for $103,000. Product A can be processed beyond the split-off point for an additional cost of $31,000 and can then be sold for $116,000. Product T can be processed beyond the split-off point for an additional cost of $17,000 and can then be sold for $65,000. Which products should be processed beyond the split-off point? (Show all calculations) What is a joint product cost? Explain in your own words.
Question 5: Presented below is selected information for three regional divisions of Medina Company. Divisions North Wets South Contribution Margin $ 300,000 $ 500,000 $ 400,000 Controllable margin $ 150,000 $ 400,000 $ 225,000 Average operating asset $1,000,000 $ 2,000,000 $1,500,000 Minimum rate of return 13% 16% 10% Instructions Compute the return on investment for each Compute the residual income for each Assume that each division has an investment opportunity that would provide a rate of return of 19%. If ROI is used to measure performance, which division or divisions will probably make the additional investment? If residual income is used to measure performance, which division or divisions will probably…
Kyle Corporation provides the following information for the Product Division and Service Division for the year. Product Division Service Division 420,000 $ 650,000 195,000 245,000 640,000 610,000 14.0% 14.0% Net sales Operating income Average total assets Target rate of return $ Requirement 1. Calculate the return on investment for each division. (Enter answers as a percent rounded to the nearest hundredth percent, X.XX%) The return on investment for the Product Division is The return on investment for the Service Division is Requirement 2. Which division has the highest ROI? % % Requirement 3. Calculate the residual income for each division. (Round answers to the nearest whole dollar.) The residual income for the Product Division is The residual income for the Service Division is Requirement 4. Which division has the highest residual income?