4 The manager of the Fleet division of Potlatch Automotive is evaluated on her division's return...
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4 The manager of the Fleet division of Potlatch Automotive is evaluated on her division's return on investment and residual income. The company requires that all divisions generate a minimum return on invested assets of 8 percent. Consistent failure to achieve this minimum target is grounds for the dismissal of a division manager. The annual cash bonus paid to division managers is 1 percent of residual income in excess of $100,000. The Fleet division's operating margin for the year was $9,348,000, during which time its average invested capital was $58,890,000. Required: a. Compute the Fleet division's return on investment and residual income. b. Will the manager of the Fleet division receive a bonus for her performance? If so, how much will it be? c. In reporting her investment center's performance for the past 10 years, the manager of the Fleet division accounted for the depreciation of her division's assets by using an accelerated depreciation method allowed for tax purposes. As a result, virtually all of the assets under her control are fully depreciated. How would the use of the accelerated method of depreciation affect ROI? Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the Fleet division's return on investment and residual income. (Round "Return on investment" to 2 decimal places.) Return on investment Residual income % Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Required C Will the manager of the Fleet division receive a bonus for her performance? If so, how much will it be? (Leave no cell blank; if there is no bonus enter "0".) Manager's bonus Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Required C In reporting her investment center's performance for the past 10 years, the manager of the Fleet division accounted for the depreciation of her division's assets by using an accelerated depreciation method allowed for tax purposes. As a result, virtually all of the assets under her control are fully depreciated. How would the use of the accelerated method of depreciation affect ROI? The use of accelerated depreciation will reasons: 1) her operating earnings margin will average asset base of her investment center will increase increase the division manager's current ROI and RI for two as annual depreciation expense decreases, and 2) the decrease as its assets become fully depreciated. Thus, the use of accelerated depreciation over time will inflate her division's ROI and RI. Given that her bonus is based on RI, she will receive a larger bonus using accelerated depreciation than she would using the straight-line depreciation method. Show less 4 The manager of the Fleet division of Potlatch Automotive is evaluated on her division's return on investment and residual income. The company requires that all divisions generate a minimum return on invested assets of 8 percent. Consistent failure to achieve this minimum target is grounds for the dismissal of a division manager. The annual cash bonus paid to division managers is 1 percent of residual income in excess of $100,000. The Fleet division's operating margin for the year was $9,348,000, during which time its average invested capital was $58,890,000. Required: a. Compute the Fleet division's return on investment and residual income. b. Will the manager of the Fleet division receive a bonus for her performance? If so, how much will it be? c. In reporting her investment center's performance for the past 10 years, the manager of the Fleet division accounted for the depreciation of her division's assets by using an accelerated depreciation method allowed for tax purposes. As a result, virtually all of the assets under her control are fully depreciated. How would the use of the accelerated method of depreciation affect ROI? Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the Fleet division's return on investment and residual income. (Round "Return on investment" to 2 decimal places.) Return on investment Residual income % Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Required C Will the manager of the Fleet division receive a bonus for her performance? If so, how much will it be? (Leave no cell blank; if there is no bonus enter "0".) Manager's bonus Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Required C In reporting her investment center's performance for the past 10 years, the manager of the Fleet division accounted for the depreciation of her division's assets by using an accelerated depreciation method allowed for tax purposes. As a result, virtually all of the assets under her control are fully depreciated. How would the use of the accelerated method of depreciation affect ROI? The use of accelerated depreciation will reasons: 1) her operating earnings margin will average asset base of her investment center will increase increase the division manager's current ROI and RI for two as annual depreciation expense decreases, and 2) the decrease as its assets become fully depreciated. Thus, the use of accelerated depreciation over time will inflate her division's ROI and RI. Given that her bonus is based on RI, she will receive a larger bonus using accelerated depreciation than she would using the straight-line depreciation method. Show less
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Related Book For
Financial And Managerial Accounting The Basis For Business Decisions
ISBN: 9781260247930
19th Edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
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