The following data relate to the Western Division of Palmerston Ltd for the current year. Sales revenue Sales returns $1,632,500 $32,500 Variable operating expenses 64% of sales Fixed expenses controllable by the divisional manager $380,000 Fixed expenses traceable to the division but controllable by 11,000 other Divisions Total assets at the beginning of the year $1,080,000 Total assets at the end of the year $1,072,000 Total current liabilities at the beginning of the year $30,000 Total current liabilities at the end of the year $32,000 Additional information: i The vacant land valued at $140,000 was identified as unproductive by the corporate management during the year. The divisional manager manages all current liabilities. Required: 1. Calculate the following for the year. a return on sales, b. investment turnover and c. return on investment (ROI) 2. Calculate the residual income if the weighted average cost of capital is 12 per cent.

The following data relate to the Western Division of Palmerston Ltd for the current year. Sales revenue Sales returns $1,632,500 $32,500 Variable operating expenses 64% of sales Fixed expenses controllable by the divisional manager $380,000 Fixed expenses traceable to the division but controllable by 11,000 other Divisions Total assets at the beginning of the year $1,080,000 Total assets at the end of the year $1,072,000 Total current liabilities at the beginning of the year $30,000 Total current liabilities at the end of the year $32,000 Additional information: i The vacant land valued at $140,000 was identified as unproductive by the corporate management during the year. The divisional manager manages all current liabilities. Required: 1. Calculate the following for the year. a return on sales, b. investment turnover and c. return on investment (ROI) 2. Calculate the residual income if the weighted average cost of capital is 12 per cent.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 5E: Service department charges In divisional income statements prepared for Demopolis Company, the...

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