Based on the following analysis of last year's operations of Bingham, Inc., a financial vice president of the company believes that the firm's total net income could be increa division were discontinued. (Amounts are given in thousands of dollars.) All Other Engineering Last year results Totals Divisions Division Sales $17,250 $12,000 $5,250 Cost of services: Variable (6,140) (3,900) (2,240) Fixed (3,360) (2,100) (1,260) Gross profit 7,750 6,000 1,750 Operating expenses: Variable (4,750) (3,000) (1,750) Fixed (2,500) (1,800) (700)

Based on the following analysis of last year's operations of Bingham, Inc., a financial vice president of the company believes that the firm's total net income could be increa division were discontinued. (Amounts are given in thousands of dollars.) All Other Engineering Last year results Totals Divisions Division Sales $17,250 $12,000 $5,250 Cost of services: Variable (6,140) (3,900) (2,240) Fixed (3,360) (2,100) (1,260) Gross profit 7,750 6,000 1,750 Operating expenses: Variable (4,750) (3,000) (1,750) Fixed (2,500) (1,800) (700)

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter24: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 3TIF: Communication The Norse Division of Gridiron Concepts Inc. experienced significant revenue and...

See similar textbooks

Similar questions

Keep or Drop a Division Jan Shumard, president and general manager of Danbury Company, was concerned about the future of one of the companys largest divisions. The divisions most recent quarterly income statement follows: Jan is giving serious consideration to shutting down the division because this is the ninth consecutive quarter that it has shown a loss. To help him in his decision, the following additional information has been gathered: The division produces one product at a selling price of 100 to outside parties. The division sells 50% of its output to another division within the company for 83 per unit (full manufacturing cost plus 25%). The internal price is set by company policy. If the division is shut down, the user division will buy the part externally for 100 per unit. The fixed overhead assigned per unit is 20. There is no alternative use for the facilities if shut down. The facilities and equipment will be sold and the proceeds invested to produce an annuity of 100,000 per year. Of the fixed selling and administrative expenses, 30% represent allocated expenses from corporate headquarters. Variable selling expenses are 5 per unit sold for units sold externally. These expenses are avoided for internal sales. No variable administrative expenses are incurred. Required: 1. Prepare an income statement that more accurately reflects the divisions profit performance. 2. Should the president shut down the division? What will be the effect on the companys profits if the division is closed?
Far Sight is a division of a major corporation. The following data are for the latest year of operations: $24,480,000 %$1,738,080 $6,000,000 16% Sales Net operating Income Average operating assets The company's minimum required rate of return Required: a. What is the division's return on investment (ROI)? b. What is the division's residual income?
Adams Cough Drops operates two divisions. The following information pertains to each division for Year 1. Division A Division B $200,000 $85,000 $ 16,100 $ 9,300 $ 59,000 $37,000 17% Sales Operating income Average operating assets Company's desired rate of return 17% Required a. Compute each division's residual income. b. Which division increased the company's profitability more? a. Division A Division B b. The division that increased the company's profitability more is Residual Income
Dickonson Products is a division of a major corporation. The following data are for the last year of operations: Sales... $16,640,000 $399,360 Net operating income Average operating assets $4,000,000 The company's minimum required rate of return. 18% The division's residual income is closest to: Select one: a. $(320,640) b. $1,119,360 c. $399,360 d. $(2,595,840)
Kyle Corporation provides the following information for the Product Division and Service Division for the year. Product Division Service Division 420,000 $ 650,000 195,000 245,000 640,000 610,000 14.0% 14.0% Net sales Operating income Average total assets Target rate of return $ Requirement 1. Calculate the return on investment for each division. (Enter answers as a percent rounded to the nearest hundredth percent, X.XX%) The return on investment for the Product Division is The return on investment for the Service Division is Requirement 2. Which division has the highest ROI? % % Requirement 3. Calculate the residual income for each division. (Round answers to the nearest whole dollar.) The residual income for the Product Division is The residual income for the Service Division is Requirement 4. Which division has the highest residual income?
Assume the Residential Division of Kappy Faucets had the following results last year: Net sales revenue $ 6,480,000 Operating income 2,592,000 Average total assets 5,400,000 Management's target rate of return 16% What is the division's profit margin ratio? O A. 250% B. 48% O C. 120% O D. 40%
Far Sight is a division of a major corporation. The following data are for the latest year of operations: Sales $24,480,000 Net operating Income $1,738,080 Average operating assets $6,000,000 The company’s minimum required rate of return 16% Required: a. What is the division's return on investment (ROI)?b. What is the division's residual income?
Assume the Residential Division of Kappy Faucets had the following results last year. Net sales revenue $ 6,600,000 Operating income 990,000 Average total assets 5,500,000 Management's target rate of return 16% What is the division's profit margin ratio? O A 120% OB. 15% OC. 667% OD. 18%
Hardin Company is a division of a major corporation. The following data are for the latest year of operations: Sales $ 19,600,000 Net operating income $ 470,400 Average operating assets $ 5,000,000 The company's minimum required rate of return 10 % Required: What is the division's residual income?
The sales, income from operations, and invested assets for each division of Wren Company are as follows: Income from Invested Sales Operations Assets Division C 5.00 $630,000 $4,000,000 Division D 6,800,000 760,000 3,900,000 Division E 3,750,000 750,000 7,500,000 Management has established a minimum rate of return for invested assets of 10%. Do Not Use Commas or $ in Your Answers What is the Residual Income for Division C? What is the Residual Income for Division D? What is the Residual Income for Division E? Based on Residual Income, Division is the most profitable.
Answer and solution please. Thank you! Consider the following portion of a segmented income statement for the year just ended. Assume that thefixed expenses of Division X include P30,000 of direct expenses and that the discontinuance of the departmentwill not affect the sales of the other departments nor reduce the common expenses:Net sales P100,000Variable manufacturing costs 60,000Gross profit P 40,000Fixed expenses (direct and allocated) 50,000Loss from operations P (10,000)What would be the effect on the firm’s operating income if Division X were discontinued?a. P10,000 increase b. P40,000 decrease c. P100,000 decrease d. P10,000 decrease
Assume the Residential Division of Kopper Faucets had the following results last year: Net sales revenue Operating income Average total assets Management's target rate of return What is the division's ROI? OA. 48% OB. 15% O C. 320% OD. 208% $ 16,000,000 2,400,000 5,000,000 15% ***