Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780134128528
Author: Karen W. Braun, Wendy M. Tietz
Publisher: PEARSON
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Textbook Question
Chapter 10, Problem 10.51BP
Evaluate divisional performance (Learning Objective 3)
Sacramento Paints is a national paint manufacturer and retailer. The company is segmented into five divisions: Paint Stores (branded retail locations), Consumer (paint sold through stores like Sears, Home Depot, and Lowe’s), Automotive (sales to auto manufacturers), International, and Administration. The following is selected hypothetical divisional information for its two largest divisions: Paint Stores and Consumer (in thousands of dollars).
Assume that management has specified a 21% target
Requirements
Round all calculations to four decimal places.
- 1. Calculate each division’s
ROI . - 2. Calculate each division’s sales margin. Interpret your results.
- 3. Calculate each division’s capital turnover. Interpret your results.
- 4. Use the expanded ROI formula to confirm your results from Requirement 1. Interpret your results.
- 5. Calculate each division’s RI. Interpret your results and offer recommendations for any division with negative RI.
- 6. Total asset data were provided in this problem. If you were to gather this information from an annual report, how would you measure total assets? Describe your measurement choices and some of the pros and cons of those choices.
- 7. Describe some of the factors that management considers when setting its minimum target rate of return.
- 8. Explain why some firms prefer to use RI rather than ROI for performance measurement.
- 9. Explain why budget versus actual performance reports are insufficient for evaluating the performance of investment centers.
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Zuds, Helpful Hardware's manufacturing division of lawn-mowing and snow removal equipment, segments its business according to customer type: Professional and Residential. The following divisional information was available for the past year. View the divisional information. Requirements Round all of your answers to four decimal places.
1. Calculate each division's ROI.
2. Calculate each division's profit margin. Interpret your results.
3. Calculate each division's asset turnover. Interpret your results.
4. Use the expanded ROI formula to confirm your results from Requirement 1. What can you conclude?
Evaluating Divisional Performance
The three divisions of Delicious Foods are Snack Goods, Cereal, and Frozen Foods. The divisions are structured as investment centers. The following responsibility reports were prepared for the three divisions for the prior year:
Which division is making the best use of invested assets and should be given priority for future capital investments?
Assuming that the minimum acceptable return on new projects is 19%, would all investments that produce a return in excess of 19% be accepted by the divisions? Explain.
Identify opportunities for improving the company's financial performance.
Requirements:
V-STATEMENT OF THE PROBLEM
Based on the areas of consideration come up with central problem of the case. Or you can enumerate the problems you find and arrange them in order of significance in order to be able to identify the central problem.
Always write one-line statement of the problem either a declarative statement form or question form.
VI -…
Sherwin Williams is a national paint manufacturer and retailer. The company is segmented into five divisions: Paint Stores (branded retail location), Consumer (paint and through stores such as Sears, Home Depot, etc.), Automotive (sales to auto manufacturers), International, and Administration. The following is selected hypothetical divisional information for the company's two largest divisions: Paint Stores and Consumer (in thousand of dollars).
Sales Operating Income Total Assets
Paint Stores $3,900,000 $507,000 $1,500,000
Consumer $1,250,000 $175,000 $1,562,000
Assume that management has specified a 20% target rate of return.
Calculate each division's capital turnover.
Chapter 10 Solutions
Managerial Accounting (5th Edition)
Ch. 10 - (Learning Objective 1) Companies often...Ch. 10 - (Learning Objective 1) Which of the following is...Ch. 10 - (Learning Objective 1) In terms of responsibility...Ch. 10 - (Learning Objective 2) Which of the following is...Ch. 10 - (Learning Objective 2) A segment margin is the...Ch. 10 - Prob. 6QCCh. 10 - Prob. 7QCCh. 10 - Prob. 8QCCh. 10 - Prob. 9QCCh. 10 - Prob. 10QC
Ch. 10 - Identify and understand responsibility centers...Ch. 10 - Identify types of responsibility centers (Learning...Ch. 10 - Identify centralized and decentralized...Ch. 10 - Prob. 10.4SECh. 10 - Prob. 10.5SECh. 10 - Prob. 10.6SECh. 10 - Calculate ROI (Learning Objective 3) Refer to Epic...Ch. 10 - Prob. 10.8SECh. 10 - Prob. 10.9SECh. 10 - Prob. 10.10SECh. 10 - Prob. 10.11SECh. 10 - Interpret a performance report (Learning Objective...Ch. 10 - Prob. 10.13SECh. 10 - Classify KPIs by balanced scorecard perspective...Ch. 10 - Use vocabulary terms (Learning Objectives 1, 2, 3,...Ch. 10 - Prob. 10.16SECh. 10 - Identify type of responsibility center (Learning...Ch. 10 - Complete and analyze a performance report...Ch. 10 - Prepare a segment margin performance report...Ch. 10 - Compute and interpret the expanded ROI equation...Ch. 10 - Prob. 10.21AECh. 10 - Prob. 10.22AECh. 10 - Comparison of ROI and residual income (Learning...Ch. 10 - Prob. 10.24AECh. 10 - Comprehensive flexible budget problem (Learning...Ch. 10 - Prepare a flexible budget performance report...Ch. 10 - Work backward to find missing values (Learning...Ch. 10 - Construct a balanced scorecard (Learning Objective...Ch. 10 - Sustainability and the balanced scorecard...Ch. 10 - Identify type of responsibility center (Learning...Ch. 10 - Complete and analyze a performance report...Ch. 10 - Prob. 10.32BECh. 10 - Prob. 10.33BECh. 10 - Prob. 10.34BECh. 10 - Prob. 10.35BECh. 10 - Prob. 10.36BECh. 10 - Prob. 10.37BECh. 10 - Prob. 10.38BECh. 10 - Prob. 10.39BECh. 10 - Prob. 10.40BECh. 10 - Prob. 10.41BECh. 10 - Sustainability and the balanced scorecard...Ch. 10 - Prepare a budget with different volumes for...Ch. 10 - Prepare and interpret a performance report...Ch. 10 - Prob. 10.45APCh. 10 - Prob. 10.46APCh. 10 - Prob. 10.47APCh. 10 - Evaluate subunit performance (Learning Objectives...Ch. 10 - Prob. 10.49BPCh. 10 - Prob. 10.50BPCh. 10 - Evaluate divisional performance (Learning...Ch. 10 - Prob. 10.52BPCh. 10 - Determine transfer price at a manufacturer under...Ch. 10 - Evaluate subunit performance (Learning Objectives...Ch. 10 - Prob. 10.55SC
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