Multinational performance measurement ROI, RI. The Grandlund Corporation manufactures similar products in the United States and Norway.

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Multinational performance measurement ROI, RI. The Grandlund Corporation manufactures similar products in the United States and Norway. The U.S. and Norwegian operations are organized as decentralized divisions. The following information is available for 2011; ROI is calculated as operating income divided by total assets:

U.S. Division Norwegian Division Operating income 8,100,000 kroner 52,500,000 kroner Total assets $8,000,000 ROI 15%

Both investments were made on December 31, 2010. The exchange rate at the time of Grandlund’s investment in Norway on December 31, 2010, was 6 kroner = $1. During 2011, the Norwegian Kroner increased steadily in value so that the exchange rate on December 31, 2011, is 7 kroner $1. The average exchange rate during 2011 is [(6 + 7) ÷ 2] = 6.5 kroner = $1.

1. a. Calculate the U.S. division’s operating income for 2011.

 b. Calculate the Norwegian division’s ROI for 2011 in kroner

2. Top management wants to know which division earned a better ROI in 2011. What would you tell them? Explain your answer

3. Which division do you think had the heifer RI performance? Explain your answer. The required rate of return on investment (calculated in U.S. dollars) is 12%.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...
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Cost Accounting A Managerial Emphasis

ISBN: 978-0136126638

13th Edition

Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav

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