Question 1
The balance sheet for the Sand Dollar division of Stellar Company shows that for 2011 it had operating assets at the beginning of the year of $250,000 and $300,000 at the end of the year. During the year, the division had $14,000 of net operating income on sales of $450,000.
A. What is the ROI of the division?
B. If sales were $600,000 and net operating income was $30,000 and operating assets at the end of the year were $350,000, what would ROI be?
All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations. For problems, be sure to answer all questions and provide all requested information
Question 2
Bienville Company has two operating divisions, and the financial information for each division for 2010 is:
|
Top Division
|
Bottom Division
|
|
Sales
|
$2,000,000
|
$3,500,000
|
|
Average operating assets
|
1,000,000
|
1,000,000
|
|
Net operating income
|
180,000
|
210,000
|
|
Property, plant and equipment
|
475,000
|
400,000
|
Compute ROI for each division. Which manager seems to be doing the best job? Why? Does ROI necessarily the best measure of the performance of these managers?
Question 3
Skiboards, Inc. has two divisions. The Boards Division makes the board that is made into Skiboards by the Ski Division, but the Board Division can also sell the boards it makes to outside customers. In 2011, The Boards Division reported the following information:
|
Selling price per board
|
$ 52
|
|
Variable costs per board
|
$ 22
|
|
Number of boards:
|
|
|
Produced in 2011
|
10,000
|
|
Sold to the Ski Division
|
8,000
|
|
Sold to outside customers
|
2,000
|
Sales from the Boards Division to the Ski Division were made at the same price that sales were made to outside customers. The Ski Division incurred an additional $100 per board in variable costs in shaping the boards into Skiboards and then sold the finished Skiboards for $300 each.
A. Prepare income statements for the Boards Division, the Ski Division, and for Skiboards, Inc.
B. Assume that the Boards Division's manufacturing capacity is limited to 10,000 boards per year and that next year, the Ski Division wants to buy 9,000 boards from the Boards Division instead of the 8,000 boards that it bought in 2011 (the Boards Division is the only place that the Ski Division can buy these boards). From the standpoint of the company as a whole, should the Boards Division sell the 1,000 additional boards to the Ski Division or continue to sell those boards to outside customers?
Question 4
Magic Lawnmower Company assembles lawnmowers from a number of different parts. Some of those parts are manufactured by Magic Lawnmower and some of the parts are purchased from other companies. The vendor for the blades that Magic Lawnmower uses has just increased the price of blades to $10 per blade for the first 5,000 blades and $9 per blade for all blades ordered during the year in excess of 5,000. Magic Lawnmower expects to use 7,500 blades this year. Magic lawnmower can make the blades for the following unit costs:
|
Direct materials
|
$3.50
|
|
Direct labor
|
$1.75
|
|
Variable manufacturing overhead
|
$4.25
|
If Magic lawnmower elects to make the blades rather than buy the blades from its vendor, what are the opportunity costs? If Magic lawnmower elects to make the blades rather than buy them, what are the opportunity costs?
Question 5
The following information is provided by XYZ Corporation:
a. The manager of Department X is responsible for generating cash receipts and incurring costs so the corporation can make a profit. This manager is not responsible for decisions about what equipment to buy.
b. The manager of Department Y is responsible for operation of the call center where customers order products from the corporation.
c. Department Z produces one of the parts that is used to make the products that the corporation sells to consumers.
Classify each of these departments as a cost center, a profit center, or an investment center, and explain the classification that you assigned to each department.
Your response should be at least 200 words in length. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations. For problems, be sure to answer all questions and provide all requested information