Computer Company is headquartered in Hong Kong. It has two divisions, namely Apply Division and Orange...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Computer Company is headquartered in Hong Kong. It has two divisions, namely Apply Division and Orange Division. The Apple Division, a profit center of Computer Company, reported the following data for the last quarter of 2021: Sales $9,000,000 Variable costs 6,300,000 Traceable fixed costs 1,200,000 Common fixed costs 830,000 Orange Division is an investment center and reported the following data for the last quarter of 2021. Sales $4,000,000 Variable costs 2,600,000 Traceable fixed costs 800,000 Average operating assets 5,000,000 Top management is unhappy with the investment center's return on investment (ROI). It asks the manager of the Orange Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action. 1. Increase sales by $400,000 with no change in the contribution margin percentage. 2. Reduce variable costs by $120,000. 3. Reduce average operating assets by 4% Required: a. Prepare Income Statement of Apple Division, with Segment Margin for the last quarter of 2021. (4 marks) b. Compute the return on investment (ROI) of Orange Division for the last quarter of 2021. Evaluate the ROI under each of the proposed courses of action for Orange Division. (4 marks) C. Apart from Apple Division and Orange Division, Computer Company has another division, namely Division C. The Chief Executive Officer of Computer Company asks you to analyze the performance measurement system of Division C, and the relevant information is listed below. Division C evaluates its managers based on return on investment (ROI). Katy Fung and Susan Wong, managers of the product lines P and Q respectively, have recently suffered from declining profits in their product lines. Over dinner, they discuss the problem, and how they could improve performance. Most of the discussion centers around ways to increase sales. Near the end of the dinner period, however, Susan Wong wonders whether there is some way to reduce investment, and by decreasing the denominator of the ROI fraction, to improve the final result. Back at work, Katy Fung continues to mull over Susan's remarks. She decides to pursue the matter further, and before the end of the quarter she has sold quite a bit of older equipment and replaced it with equipment obtained with a short- term lease. Her performance, measured by ROI, is markedly improved, although sales continue to be disappointing. Who are the stakeholders in this situation? Is Katy's action ethical? Briefly explain in no more than 85 words. (6 marks) d. As you have finished the course of Management Accounting I, your friend who studies social science is interested to know more about accounting. She asked you "Why an organization may use different bases for evaluating the performance of managers of different types of responsibility centers." Prepare a response to your friend in 120 words. (6 marks) Computer Company is headquartered in Hong Kong. It has two divisions, namely Apply Division and Orange Division. The Apple Division, a profit center of Computer Company, reported the following data for the last quarter of 2021: Sales $9,000,000 Variable costs 6,300,000 Traceable fixed costs 1,200,000 Common fixed costs 830,000 Orange Division is an investment center and reported the following data for the last quarter of 2021. Sales $4,000,000 Variable costs 2,600,000 Traceable fixed costs 800,000 Average operating assets 5,000,000 Top management is unhappy with the investment center's return on investment (ROI). It asks the manager of the Orange Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action. 1. Increase sales by $400,000 with no change in the contribution margin percentage. 2. Reduce variable costs by $120,000. 3. Reduce average operating assets by 4% Required: a. Prepare Income Statement of Apple Division, with Segment Margin for the last quarter of 2021. (4 marks) b. Compute the return on investment (ROI) of Orange Division for the last quarter of 2021. Evaluate the ROI under each of the proposed courses of action for Orange Division. (4 marks) C. Apart from Apple Division and Orange Division, Computer Company has another division, namely Division C. The Chief Executive Officer of Computer Company asks you to analyze the performance measurement system of Division C, and the relevant information is listed below. Division C evaluates its managers based on return on investment (ROI). Katy Fung and Susan Wong, managers of the product lines P and Q respectively, have recently suffered from declining profits in their product lines. Over dinner, they discuss the problem, and how they could improve performance. Most of the discussion centers around ways to increase sales. Near the end of the dinner period, however, Susan Wong wonders whether there is some way to reduce investment, and by decreasing the denominator of the ROI fraction, to improve the final result. Back at work, Katy Fung continues to mull over Susan's remarks. She decides to pursue the matter further, and before the end of the quarter she has sold quite a bit of older equipment and replaced it with equipment obtained with a short- term lease. Her performance, measured by ROI, is markedly improved, although sales continue to be disappointing. Who are the stakeholders in this situation? Is Katy's action ethical? Briefly explain in no more than 85 words. (6 marks) d. As you have finished the course of Management Accounting I, your friend who studies social science is interested to know more about accounting. She asked you "Why an organization may use different bases for evaluating the performance of managers of different types of responsibility centers." Prepare a response to your friend in 120 words. (6 marks)
Expert Answer:
Answer rating: 100% (QA)
Income Statement of Apple Division Particulars Amount Sale... View the full answer
Related Book For
Fundamentals of Cost Accounting
ISBN: 978-1259565403
5th edition
Authors: William Lanen, Shannon Anderson, Michael Maher
Posted Date:
Students also viewed these accounting questions
-
The Statistics Canada reported the following data for June 2011: Labour force participation rate: 68 percent Working-age population: 27,975,700 Employment-to-population ratio: 63.2 a. Labour force....
-
A company reported the following data for the year ending 2018: Description Amount Sales Sales discount Sales returns and allowances Cost of goods sold Operating expense Income tax expense $400,000...
-
Peyvandi Co., a profit center of California Enterprises, manufactures Product BP3751-9S to sell internally to other company divisions as well as externally. One unit of Product BP3751-9S sells for...
-
Suppose that the magnetic field in some region has the form B = kzx (where k is a constant). Find the force on a square loop (side a), lying in the yz plane and centered at the origin, if it carries...
-
Now that you have read the chapter on risk management and property liability insurance, what would you recommend to Nick and Amber in the case at the beginning of the chapter regarding: 1. The...
-
What two key models of communication were introduced in this chapter and when would one be preferred over the other?
-
In a sample of 100 ceramic pistons made for an experimental diesel engine, 18 were cracked. Construct a \(95 \%\) confidence interval for the true proportion of cracked pistons using the large sample...
-
M. Anthony, LLP, produces music in a studio in London. The cost of producing one typical song follows: Average Cost per Song: Labor, including musicians and technicians . . . . . . . . . . . . ....
-
If you were a part of the team that was responsible for expanding the demobilization unit after a devastating tornado, what would be some of your designated duties to ensure there were minimal issues...
-
Lombard Ltd has been offered a contract for which there is available production capacity. The contract is for 20,000 identical items, manufactured by an intricate assembly operation, to be produced...
-
What are networks? Describe six ways of gathering information from networks and expand on how they contribute toward the achievement of organisational goals.
-
What are the major strengths and weaknesses of the APT in relation to the CAPM?
-
Write the simple return for a stock. Also, write the continuously compounded rate of return. How are these two returns related to one another?
-
Does time-variation in beta explain the weak evidence for the CAPM? Discuss empirical results of studies testing conditional CAPMs.
-
Write the ICAPM as a multifactor model with state variables. What could be used to proxy for the state variables?
-
Explain the materiality and conservatism constraints of financial accounting.
-
Pre-exercise entity value of ($1,200) $1,200 divided among (8) shares & 5 warrants Call option worth ($ 35,40) Warrant as optioning..calls on entity per existing share....... Warrant value = ........
-
Using the parallel-axis theorem, determine the product of inertia of the area shown with respect to the centroidal x and y axes. 6 in. 9 in. 9 in- 4.5 in. in. 4.5 in.
-
What is the difference between gross margin and contribution margin .
-
Why does a cost accountant need to be familiar with new developments in information technology?
-
A computer company always sells the processing unit and monitor together as a bundled package. Is there any benefit to computing a sales mix variance under these circumstances?
-
Determine an expansion for the work done in a steady flow adiabatic process.
-
5 m 3 of gas at 8 bar and 180C is heated keeping the pressure same till the volume is doubled. Calculate (a) heat added, (b) external work done, and (c) change in internal energy during the process.
-
A heat engine receives 1000 kW of heat at constant temperature of 285C and rejects heat at 5C . The possible heat rejected are: (a) 840 kW, (b) 442 kW and (c) 300 kW. Comment on the results.
Study smarter with the SolutionInn App