Compute return on investment for each of the divisions below (each is an investment center). Which division performed the best, based on return on investment?

Investment Center	Net Income	Average Assets	Return on Investment
Cameras and camcorder	$4,500,000	$20,000,000	_____%
Phones and communications	1,500,000	12,500,000	_____
Computers and accessories	800,000	10,000,000	_____

Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow:

Required:

1. For each division, compute the return on investment (ROI) in terms of margin and turnover. Where necessary, carry computations to two decimal places.

2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 15%. Compute the residual income for each division.

3. Is Yokohama’s greater amount of residual income an indication that it is better managed? Explain.

Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center).

$$\begin{matrix} \text{Investment Center} & \text{Sales} & \text{Income} & \text{Average Invested Assets}\\ \text{Electronics}\ldots\ldots\ldots & \text{\$40,000,000} & \text{\$2,880,000} & \text{\$16,000,000}\\ \text{Sporting goods}\ldots\ldots\ldots & \text{20,000,000} & \text{2,040,000} & \text{12,000,000}\\ \end{matrix}$$

1. Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company? 2. Assume a target income level of 12% of average invested assets. Compute residual income for each department. Which department generated the most residual income for the company? 3. Assume the electronics department is presented with a new investment opportunity that will yield a 15% return on investment. Should the new investment opportunity be accepted? Explain.

Compute return on investment for each of the divisions below (each is an investment center):

Which division performed the best; based on return on investment? Complete this question by entering your answers in the tabs below:

(Round your final answers to 1 decimal place.)

$$\begin{array}{lr} \textbf{Investment Center}&\textbf{Net Income}&\textbf{Average Assets}&\textbf{ROI}\\ \text{Cameras and camcorders}&\$\ {6,118,000 }&\$\ {26,600,000}\\ \text{Phones and communications}&\$\ {3,628,500 }&\$\ {17,700,000 }\\ \text{Computers and accessories}&\$\ {2,106,000 }&\$\ {10,800,000 }\\ \end{array}$$

Assume a target income of 12% of average invested assets. Compute residual income for each division.

L’Oréal reports the following for a recent year for the major divisions in its cosmetics branch. (Amounts in euros)

$$\begin{array}{lccc} \textbf{Euro millions}&\textbf{Sales}&\textbf{Income}&\textbf{Total Assets End of Year}&\textbf{Total Assests Beginning of Year}\\[5pt] \text{Professional products}&\text{\hspace{10pt}2,717}&\text{\hspace{15pt}552}&\text{\hspace{10pt}2,624}&\text{\hspace{10pt}2,516}\\[5pt] \text{Consumer products}&\text{\hspace{10pt}9,530}&\text{\hspace{8pt}1,765}&\text{\hspace{10pt}5,994}&\text{\hspace{10pt}5,496}\\[5pt] \text{Luxury products}&\text{\hspace{10pt}4,507}&\text{\hspace{15pt}791}&\text{\hspace{10pt}3,651}&\text{\hspace{10pt}4,059}\\[5pt] \text{Active cosmetics}&\underline{\text{\hspace{10pt}1,386}}&\underline{\text{\hspace{15pt}278}}&\underline{\text{\hspace{16pt}830}}&\underline{\text{\hspace{17pt}817}}\\[5pt] \text{Total}&\underline{\underline{\text{\hspace{6pt}18,140}}}&\underline{\underline{\text{\hspace{6pt}3,386}}}&\underline{\underline{\text{\hspace{3pt}13,099}}}&\underline{\underline{\text{\hspace{3pt}12,888}}}\\[5pt] \end{array}$$

1. Compute profit margin for each division. State your answers as percents, rounded to two decimal places. Which L’Oréal division has the highest profit margin?

2. Compute investment turnover for each division. Round your answers to two decimal places. Which L’Oréal division has the best investment turnover?

A company purchases a 10,020-square-foot commercial building for $325,000, and spends an additional$50,000 to divide the space into two separate rental units and prepare it for rent. Unit A, which has the desirable location on the corner and contains 3,340 square feet, will be rented for $1.00 per square foot. Unit B contains 6,680 square feet and will be rented for$0.75 per square foot. How much of the joint cost should be assigned to Unit B using the value basis of allocation?

Pirate Seafood Company purchases lobsters and processes them into tails and flakes. It sells the lobster tails for $21 per pound and the flakes for$14 per pound. On average, 100 pounds of lobster are processed into 52 pounds of tails and 22 pounds of flakes, with 26 pounds of waste. Assume that the company purchased 2,400 pounds of lobster for $4.50 per pound and processed the lobsters with an additional labor cost of$1,800. No materials or labor costs are assigned to the waste. If 1,096 pounds of tails and 324 pounds of flakes are sold, what is (1) the allocated cost of the sold items and (2) the allocated cost of the ending inventory? The company allocates joint costs on a value basis.

Jansen Company reports the following for its Ski department for the year 2019. All of its costs are direct, except as noted.

    Sales                        $605,000                                                      
    Cost of goods sold            425,000
    Salaries                      112,000 ($15,000 is indirect)
    Utilities                    $14,000 ($3,000 is indirect)
    Depreciation                   42,000 ($10,000 is indirect)
    Office expenses                20,000 (all is indirect)

Prepare a (1) departmental income statement for 2019 and (2) departmental contribution to overhead report for 2019. (3) Based on these two performance reports, should Jansen eliminate the Ski department?

Arctica manufactures snowmobiles and ATVs. These products are made in different departments, and each department has its own manager. Each responsibility performance report only includes those costs that the particular department manager can control: raw materials, wages, supplies used, and equipment depreciation.

$$\begin{array}{c} &&&&&&&&&&\textbf{Budget}&&&&&&&&&&&&&\textbf{Actual}\\ \end{array}$$

$$\begin{array}{lcc} &\textbf{Snowmobile}&\textbf{ATV}&\textbf{Combined}&&\textbf{Snowmobile}&\textbf{ATV}&\textbf{Combined}\\[5pt] \text{Raw materials}&\text{\$19,500}&\text{\$27,000}&\text{\$\hspace{10pt}47,000}&&\text{\$19,420}&\text{\$28,820}&\text{\$\hspace{10pt}48,240}\\ \text{Employee wages}&\text{\hspace{5pt}10,400}&\text{\hspace{5pt}20,500}&\text{\hspace{15pt}30,900}&&\text{\hspace{5pt}10,660}&\text{\hspace{5pt}21,240}&\text{\hspace{15pt}31,900}\\ \text{Dept. manager salary}&\text{\hspace{10pt}4,300}&\text{\hspace{10pt}5,200}&\text{\hspace{20pt}9,500}&&\text{\hspace{10pt}4,400}&\text{\hspace{10pt}4,400}&\text{\hspace{20pt}8,800}\\ \text{Supplies used}&\text{\hspace{10pt}3,300}&\text{\hspace{20pt}900}&\text{\hspace{20pt}4,200}&&\text{\hspace{10pt}3,170}&\text{\hspace{17pt}920}&\text{\hspace{20pt}4,090}\\ \text{Depreciation-Equip}&\text{\hspace{10pt}6,000}&\text{\hspace{5pt}12,500}&\text{\hspace{15pt}18,500}&&\text{\hspace{10pt}6,000}&\text{\hspace{5pt}12,500}&\text{\hspace{15pt}18,500}\\ \text{Utilities}&\text{\hspace{20pt}360}&\text{\hspace{18pt}540}&\text{\hspace{27pt}900}&&\text{\hspace{20pt}330}&\text{\hspace{17pt}500}&\text{\hspace{27pt}830}\\ \text{Rent}&\underline{\text{\hspace{13pt}5,700}}&\underline{\text{\hspace{10pt}6,300}}&\underline{\text{\hspace{15pt}12,000}}&&\underline{\text{\hspace{10pt}5,300}}&\underline{\text{\hspace{10pt}6,300}}&\underline{\text{\hspace{15pt}11,600}}\\ \textbf{Totals}&\underline{\underline{{\$49,560}}}&\underline{\underline{\text{\$73,440}}}&\underline{\underline{\text{\$\hspace{5pt}123,000}}}&&\underline{\underline{\text{\$49,280}}}&\underline{\underline{\text{\$74,680}}}&\underline{\underline{\text{\$\hspace{5pt}123,960}}}\\ \end{array}$$

Prepare a responsibility accounting report for the ATV department.

Heart & Home Properties is developing a subdivision that includes 600 home lots. The 450 lots in the Canyon section are below a ridge, and do not have views of the neighboring canyons and hills; the 150 lots in the Hilltop section offer unobstructed views. The expected selling price for each Canyon lot is $55,000 and for each Hilltop lot is$110,000. The developer acquired the land for $4,000,000 and spent another$3,500,000 on street and utilities improvements. Assign the joint land and improvement costs to the lots using the value basis of allocation and determine the average cost per lot.

Can management of a company such as Samsung use the cash conversion cycle as a useful measure of performance? Explain.

A merchandising company's Budget includes the following data for January.

Sales: $400,000

COGS:$270,000

Administrative salaries: $1,250

Sales commissions: 5% of sales

Advertising:$10,000

Depreciation on the store equipment: $25,000

Salary for sale manager:$30,000

Miscellaneous administrative expenses: $5,000.

The total selling expense on the January selling expense budget will be?

Refer to the earlier exercise. For April, May, and June, prepare (1) a direct labor budget and (2) a factory overhead budget.