Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Textbook Question
Chapter 10, Problem 2CE
Refer to Cornerstone Exercise 10.1. Forchen, Inc., requires an 8 percent minimum
Required:
- 1. Calculate residual income for the Small Appliances Division.
- 2. Calculate residual income for the Cleaning Products Division.
- 3. What if the minimum required rate of return was 9 percent? How would that affect the residual income of the two divisions?
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Students have asked these similar questions
The vice president of operations of Moab Bike Company is evaluating the
performance of two divisions organized as investment centers. Invested assets and
condensed income statement data for the past year ending October 31, 20Y9, for
each division are as follows: (P14-5)
Touring Bike Division
Trail Bike Division
Sales
$1,500,000
$5,00
Cost of goods sold
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900,000
4,000,000
495,000
968,000
750,000
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Instructions
1. Prepare condensed divisional income statements for the year ended October 31,
20Y9, assuming that there were no service department charges.
Touting Bike Division
Trial Bike Division
Use the following information for the next 2 questions (8 & 9).
Division X produces and sells a product to external and internal customers. Per-unit information about its operations include:
Selling price per unit to external customers $250 Variable manufacturing costs per unit 115 Fixed manufacturing overhead costs per unit 70
8. If X is operating at capacity and has unlimited external customer demand, what should be the minimum transfer price?
9. If X has sufficient excess capacity to meet internal demand, what should be the minimum transfer price?
The average operating assets and minimum required rate of return of each segment are as follows: Segment Average operating assets (in thousands) Required rate of return Pastry 2,500,000 15% Fruit Juices and Desserts 1,270,000 12% Compute, analyze, and discuss with top management: How much is the ROI and residual income of each segment? How would you compare each segment's performance based on ROI and residual income? What actions would you recommend to improve or maintain each segment's. ROI and residual income? Fast Food 890,000 3%
Chapter 10 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 10 - Prob. 1DQCh. 10 - Explain why firms choose to decentralize.Ch. 10 - Explain how access to local information can...Ch. 10 - What are margin and turnover? Explain how these...Ch. 10 - What are the three benefits of ROI? Explain how...Ch. 10 - What are two disadvantages of ROI? Explain how...Ch. 10 - What is residual income? Explain how residual...Ch. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - What is a transfer price?
Ch. 10 - Prob. 11DQCh. 10 - If the minimum transfer price of the selling...Ch. 10 - If an outside, perfectly competitive market exists...Ch. 10 - Prob. 14DQCh. 10 - Prob. 15DQCh. 10 - Forchen, Inc., provided the following information...Ch. 10 - Refer to Cornerstone Exercise 10.1. Forchen, Inc.,...Ch. 10 - Ignacio, Inc., had after-tax operating income last...Ch. 10 - Prob. 4CECh. 10 - Prob. 5CECh. 10 - Prob. 6CECh. 10 - Jarriot, Inc., presented two years of data for its...Ch. 10 - Refer to Exercise 10.7 for data. At the end of...Ch. 10 - Refer to the data given in Exercise 10.8....Ch. 10 - Brewster Company manufactures elderberry wine....Ch. 10 - Xenold, Inc., manufactures and sells cooktops and...Ch. 10 - Prob. 12ECh. 10 - Jocassee Furniture Manufacturing, Inc., has a...Ch. 10 - Prob. 14ECh. 10 - Mossfort, Inc., has a division in Canada that...Ch. 10 - A multinational corporation has a number of...Ch. 10 - Consider the data for each of the following four...Ch. 10 - The following selected data pertain to the Argent...Ch. 10 - Prob. 19ECh. 10 - The key difference between residual income and EVA...Ch. 10 - If sales and average operating assets for Year 2...Ch. 10 - Prob. 22ECh. 10 - Refer to 10.22. If the imputed interest rate is...Ch. 10 - A company had WACC (weighted average cost of...Ch. 10 - Prob. 25PCh. 10 - Raddington Industries produces tool and die...Ch. 10 - Prob. 27PCh. 10 - Prob. 28PCh. 10 - Oriole, Inc., owns a number of food service...Ch. 10 - Prob. 30PCh. 10 - Prob. 31PCh. 10 - Renslen, Inc., a truck manufacturing conglomerate,...Ch. 10 - Jump Start Company (JSC), a subsidiary of Mason...Ch. 10 - Prob. 34PCh. 10 - Grate Care Company specializes in producing...
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