Delby Industries has manufactured prefabricated houses for over 20 years. The houses are constructed in sections to
Question:
JENSEN DIVISION
Selected Financial Information
For the Year Ended December 31, 2012
Sales ................. $26,000,000
Contribution margin ........... 9,100,000
Controllable margin .......... 2,460,000
Instructions
(a) Calculate the following performance measures for 2012 for the Jensen Division.
(1) Return on investment (ROI).
(2) Residual income.
(b) Would the management of Jensen Division have been more likely to accept the investment opportunity it had in 2012 if residual income were used as a performance measure instead of ROI? Explain your answer.
(CMA adapted)
Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
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Related Book For
Accounting Tools for business decision making
ISBN: 978-0470095461
4th Edition
Authors: kimmel, weygandt, kieso
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