Problem 1-Ranking Divisional Performance

Five Star company has five divisions: S,T,A,R and Y.Overall sales of the company totalled 2,500,000 for which S,T,A,R and Y contributes according to the following ratio respectively; 3:1:2.5:1.5:2 and profit percentages on sales were20%, 15%, 30%, 25% and 40% respectively.

Required:

1.Rank the divisions according to the absolute value of net income.

2.Rank the project according to their ROI assuming each division had used average investment of800,000, 400,000, 500,000, 600,000 and 900,000 respectively.

3.Rank the project according to residual income if each division were given a target net income of 15% of their average investment.

Problem 2-Preparation of a Responsibility Cost Report

A cost report for the Fair Division managed by Mr. Divina appears below:

ActualBudget

Direct Materials21,37522,650

Supplies5,5504,800

Direct Labor27,33019,176

Employees'welfare3,0002,250

Taxes and insurance4,0004,000

Representation and entertainment5,00018,300

Postage, telephone and telegraph2,2504,275

Light and water4,8006,075

Repairs and maintenance7,5007,500

Supervision12,00012,000

Depreciation15,00018,000

Other allocated costs9,0009,750

The division manager has no authority over taxes and insurance, supervision, depreciation and other allocated costs.The cost of representation and entertainment tremendously increased during the period because he had to entertain a foreigner who visited his division to study a potential business transaction and that he did it for the benefit of the company as a whole.

prepare a responsibility report for the evaluation of the division manager during the period under review.