Timber Products Inc. (TPI) is a market leader in the supply of timber wood to the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Timber Products Inc. (TPI) is a market leader in the supply of timber wood to the furniture manufacturing industry. The company has two divisions. TPI's Timberland division manages forest land and sells timber wood as raw materials to furniture manufacturers. The other division - Manufacturing division - manufactures a range of panel products used to manufacture furniture. The following information is available for the three-year period: (1) (i) Net Assets as at 31 December were as follows: 20X6 20X5 20X4 $'000 $'000 $'000 Fixed Assets (net book value) 75,600 64,800 54,000 Net Current ASsets 64,400 55,200 56,000 Net Assets 140,000 120,000 110,000 Fixed Assets acquired at beginning of year 19,200 18 Note: No disposal of fixed assets took place during the above periods. (ii) The total capital employed by TPI was invested in the divisions during each year as follows: Division % of total capital employed Timberland 30 Manufacturing 70 1 ACC311: Strategic Management Accounting July 2021 Semester (ii) Depreciation is charged at 10% per annum on an accelerated basis. (iv) Depreciation is the only non-cash expense. (2) Operating cash flows were as follows: Division 20X6 20X5 $million $million Timberland 14.4 13.1 Manufacturing 20 18 (3) Each division has a target rate of return of 20% on average capital employed each year. Divisional managers are eligible to receive an annual bonus amounting to 30% of annual salary if the target rate of return is achieved. Part A Required: (a) Compute the return on the average capital employed for each of the divisions (rounded to one decimal place of a percentage) for the years ended 31 December 20X5 and 31 December 20X6. (b) Comment on how each divisional manager might respond to the results achieved in Part A (a). Advise TPI on any potential problems that could result. Timber Products Inc. (TPI) is a market leader in the supply of timber wood to the furniture manufacturing industry. The company has two divisions. TPI's Timberland division manages forest land and sells timber wood as raw materials to furniture manufacturers. The other division - Manufacturing division - manufactures a range of panel products used to manufacture furniture. The following information is available for the three-year period: (1) (i) Net Assets as at 31 December were as follows: 20X6 20X5 20X4 $'000 $'000 $'000 Fixed Assets (net book value) 75,600 64,800 54,000 Net Current ASsets 64,400 55,200 56,000 Net Assets 140,000 120,000 110,000 Fixed Assets acquired at beginning of year 19,200 18 Note: No disposal of fixed assets took place during the above periods. (ii) The total capital employed by TPI was invested in the divisions during each year as follows: Division % of total capital employed Timberland 30 Manufacturing 70 1 ACC311: Strategic Management Accounting July 2021 Semester (ii) Depreciation is charged at 10% per annum on an accelerated basis. (iv) Depreciation is the only non-cash expense. (2) Operating cash flows were as follows: Division 20X6 20X5 $million $million Timberland 14.4 13.1 Manufacturing 20 18 (3) Each division has a target rate of return of 20% on average capital employed each year. Divisional managers are eligible to receive an annual bonus amounting to 30% of annual salary if the target rate of return is achieved. Part A Required: (a) Compute the return on the average capital employed for each of the divisions (rounded to one decimal place of a percentage) for the years ended 31 December 20X5 and 31 December 20X6. (b) Comment on how each divisional manager might respond to the results achieved in Part A (a). Advise TPI on any potential problems that could result.
Expert Answer:
Answer rating: 100% (QA)
Answer Question A In year 20x5 Timberlands Rate of return 317approx Manufacturings Rate of return 16... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
The Transfer Price Company has two divisions (Intermediate and Final) that report to the corporate office (Corporate). The two divisions are profit centers. Intermediate produces a proprietary...
-
Philip Morris, a market leader in the tobacco industry, supported a 2009 law that allowed the Food and Drug Administration to curb cigarette advertisement [ Wall Street Journal, 2009]. Which model...
-
The Sprouts-N-Steel Company has two divisions: health foods and specialty metals. Each division employs debt equal to 30 percent and preferred stock equal to 10 percent of its total requirements,...
-
1. When a limited partnership is formed A. The partnership activities are limited B. All partners have limited liability C. Some of the partners have limited liability D. None of the partners have...
-
Divide the class into groups of three or four students. Each team must select an organization that will need to change its culture if it is to thrive in the future. Develop a PowerPoint presentation...
-
A mail-order catalog company has developed a classification model to predict whether a prospective customer will place an order if he or she receives a catalog in the mail. If the prospective...
-
\(2,4,8,-2,-5\) Plot the integers on the same number line.
-
The intangible assets section of Sappelt Company at December 31, 2015, is presented below. Patents ($70,000 cost less $7,000 amortization) ......... $63,000 Franchises ($48,000 cost less $19,200...
-
Question 1 ABC company has a dividend payout ratio of 40% and has maintained this payout ratio for several years. The current dividend per share of the company is 60p per share, and it expects that...
-
John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2020, John worked as a computer technician at a local university earning a salary of $152,000, and...
-
With regard to the customer tracking system in the previous question: once the system has captured video data and successfully tracked customers around the mall for a few months, it should identify...
-
A pressure gauge reports 3 . 0 6 x 1 0 5 N / m 2 when plugged into one of the tires in a bicycle. What is the actual ( absolute ) pressure inside the tires, in ATM? The atmospheric pressure on this...
-
3x ( 24x3 + 3x = 3x(
-
The company operates about 1,500 convenience stores. A sales assistant at one of the company's stores was murdered while on duty on the second shift. The murder was widely publicized, and employees...
-
Fox Inc. had sales of $ 6 , 0 0 0 , 0 0 0 in 2 0 2 0 and a tax rate of 3 0 % . The cost of goods sold was 7 5 % of sales and the firm s SGA was 1 0 % of sales ( which includes depreciation ) . Fox...
-
A dairy company processed raw milk for $60,000. This raw milk can be converted into the following types of milk with listed sales values. Joint Products Whole milk 2% milk Skim milk Total Sales Value...
-
Debits to Work in Process Inventory are accompanied by a creditto all but which one of the following accounts? Raw Materials Inventory Factory Labor Manufacturing Overhead Cost of Goods Sold
-
Create an appropriate display of the navel data collected in Exercise 25 of Section 3.1. Discuss any special properties of this distribution. Exercise 25 The navel ratio is defined to be a persons...
-
Under US law, depreciation allowances are based on the original cost of acquiring the asset. No account is taken for the effects of inflation on the price level over time. a. How does inflation...
-
The following table shows the composition of US federal expenditures in 1997, 2001, 2007, and 2011. From 1997 to 2001, GDP went from $ 8.3324 trillion to $ 10.2862 trillion, the GDP price deflator...
-
The analysis surrounding Figure 7.1 assumes that public schooling is a take- it- or- leave- it option. That is, individuals are not allowed to supplement public education with private lessons. Show...
-
Consider the following game trees. (a) Find all equilibria for the game tree on the left. Which of these are subgameperfect? (b) In the game tree on the right, the payoffs \ (a, b, c, d\) are...
-
Consider the following game tree. (a) What is the number of strategies of player I and of player II? How many reduced strategies does each of the players have? (b) Give the reduced strategic form of...
-
Consider a game \(G\) in strategic form. Recall that the commitment game derived from \(G\) is defined by letting player I choose one of his strategies \(x\), which is then announced to player II,...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App