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Exam 12: Segment Reporting, Decentralization, and the Balanced Scorecard

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Question 31

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Largo Company recorded for the past year sales of $750,000 and average operating assets of $375,000. What is the margin that Largo Company needed to earn in order to achieve an ROI of 15%?

A) 2.00%
B) 15.00%
C) 9.99%
D) 7.50%

E) A) and B)
F) A) and C)

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Question 32

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Idso Industries is a division of a major corporation. The following data are for the latest year of operations: Required: What is the division's residual income?

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Residual income = Net operatin...

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Question 33

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Denner Company has two divisions, A and B, that reported the following results for October: If common fixed expenses were $31,000, total fixed expenses must have been:

Lyons Company consists of two divisions, A and B. Lyons Company reported a contribution margin of $50,000 for Division A, and had a contribution margin ratio of 30% in Division B, when sales in Division B were $200,000. Net operating income for the company was $25,000 and traceable fixed expenses were $40,000. Lyons Company's common fixed expenses were:

The following information is available on Company A: -Company A's return on investment (ROI) is:

Wryski Corporation had net operating income of $150,000 and average operating assets of $500,000. The company requires a return on investment of 19%. Required: a. Calculate the company's current return on investment and residual income. b. The company is investigating an investment of $400,000 in project that will generate annual net operating income of $78,000. What is the return on investment of the project? What is the residual income of the project? Should the company invest in this project?

Licuado Juice Company has four product lines; Orange, Tomato, Carrot, and Grape. Shown below is last year's income statement segmented by product line: Net operating income last year for Licuado Company as a whole was $24,800. -Licuado is considering the implementation of a $5,000 advertising program specifically targeted at one of the four product lines. The program is expected to increase sales for any one of the product lines by $12,000. If the goal is to maximize the company's net operating income, for which product line should Licuado implement the advertising program?

The Northern Division of the Smith Company had average operating assets totaling $150,000 last year. If the minimum required rate of return is 12%, and if last year's net operating income at Northern was $20,000, then the residual income for Northern last year was:

The following information is available on Company A: -Company A's residual income is:

An investment center is any responsibility center in an organization that controls cost and revenues and invested funds.

Niesen Corporation has two major business segments-Consumer and Commercial. Data for the segment and for the company for August appear below: In addition, common fixed expenses totaled $282,000 and were allocated as follows: $127,000 to the Consumer business segment and $155,000 to the Commercial business segment. -A properly constructed segmented income statement in a contribution format would show that the net operating income of the company as a whole is:

The concept of economic value added (EVA) is most similar to:

All other things the same, a decrease in average operating assets will increase return on investment (ROI).

The West Division of Fitzmaurice Corporation had average operating assets of $450,000 and net operating income of $87,300 in November. The minimum required rate of return for performance evaluation purposes is 18%. -What was the West Division's minimum required return in November?

Heaslet Fabrication is a division of a major corporation. Last year the division had total sales of $36,640,000, net operating income of $1,795,360, and average operating assets of $8,000,000. The company's minimum required rate of return is 12%. Required: What is the division's return on investment (ROI)?

The Winter Products Division of American Sports Corporation produces and markets two products for use in the snow: Sleds and Saucers. The following data were gathered on activities last month: Required: Prepare a segmented income statement in the contribution format for last month.

The Legal Department of an organization is not considered a responsibility center because it does not generate revenue.

Forth Corporation has two major business segments-Retail and Wholesale. In March, the Retail business segment had sales revenues of $500,000, variable expenses of $245,000, and traceable fixed expenses of $90,000. During the same month, the Wholesale business segment had sales revenues of $240,000, variable expenses of $101,000, and traceable fixed expenses of $38,000. Common fixed expenses totaled $152,000 and were allocated as follows: $79,000 to the Retail business segment and $73,000 to the Wholesale business segment. Required: Prepare a segmented income statement in the contribution format for the company. Omit percentages; show only dollar amounts.

Harstin Corporation has provided the following data: -The return on investment for the past year was:

If improvement in a performance measure on a balanced scorecard should lead to improvement in another performance measure, but does not, then management should reexamine its strategy.