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elements in the equations.
1.
Rate of Return (ROI) on Investment = Profit Margin x Investment Turnover
Sales
Electronics Division:
$126,000 $1,575,000
2.
Proposal 1 Proposal 2 Proposal 3
Sales 1,575,000$ 1,395,000$ 1,575,000$
Cost of goods sold 859,600 771,450 702,000
Gross profit 715,400$ 623,550$ 873,000$
3.
Rate of Return (ROI) on Investment = Profit Margin x Investment Turnover
Sales
Proposal 1:
$157,400 $1,575,000
$1,575,000 $750,000
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Problem 23(8)-4B
Name:
Solution
Section:
ON
Rate of Return (ROI) on Investment
=
Income from Operations
x
Sales
For the Year Ended December 31, 2016
GIHBLI INDUSTRIES INC.⎯ELECTRONICS DIVISION
Estimated Income Statements
Rate of Return (ROI) on Investment
Income from Operations
Sales
Invested Assets
=
x
Invested Assets
ROI
=
x
=
21.0%
=
x
12.0%
=
4.
meet(s) the required 20% rate of return on investment.
5.
Rate of return on investment (ROI) = Profit margin x Required investment turnover
20% =8% x Required investment turnover
Proposal 1
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elements in the equations. The essay answer will not be graded.
1.
Business Consumer
Division Division
Sales
Cost of goods sold
Gross profit
Operating expenses
Income from operations
2.
Rate of Return (ROI) on Investment = Profit Margin x Investment Turnover
Sales
Business Division:
Consumer Division:
3.
Business Consumer
Division Division
Income from operations
Minimum acceptable return
Residual income
4.
Score:
Key Code:
Instructions
=
For the Year Ended December 31, 2016
Rate of Return (ROI) on Investment
=
ROI
x
=
Invested Assets
Problem 23(8)-5A
Name:
Section:
[Key essay answer here]
[Key code here]
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PAVONE COMPANY
ROI
=
x
=
x
Income from Operations
0%
Sales
Divisional Income Statements
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elements in the equations. The essay answer will not be graded.
1.
Business Consumer
Division Division
x
16.8%
ROI
=
=
Sales 2,500,000$ 2,550,000$
Cost of goods sold 1,320,000 1,350,000
2.
Rate of Return (ROI) on Investment = Profit Margin x Investment Turnover
Sales
Business Division:
$250,000 $2,500,000
2,500,000$ $1,250,000
3.
Business Consumer
Division Division
Income from operations 250,000$ 357,000$
4.
Score:
Instructions
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For the Year Ended December 31, 2016
PAVONE COMPANY
Divisional Income Statements
On the basis of income from operations, the Consumer Division generated $107,000 ($357,000
– $250,000) more income from operations than did the Business Division. However, income
from operations does not consider the amount of invested assets in each division. On the basis
Problem 23(8)-5A
Name:
Solution
Section:
ON
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=
20.0%
ROI
=
x
Sales
Invested Assets
=
x
Rate of Return (ROI) on Investment
Income from Operations
– $250,000) more income from operations than did the Business Division. However, income
ug gher pr argi
Business Division (14.0% vs. 10.0%), the Business Division has a higher investment turnover
(2.0 vs. 1.2), which generated its higher rate of return on investment. Residual income can be
viewed as a combination of the preceding two performance measures. Residual income
An asterisk (*) will appear to the right of an incorrect entry in the income statement and above or below
elements in the equations. The essay answer will not be graded.
1.
Road Mountain
Bike Bike
Division Division
Sales
Cost of goods sold
Gross profit
Operating expenses
Income from operations
2.
Rate of Return (ROI) on Investment = Profit Margin x Investment Turnover
Sales
Road Bike Division
Mountain Bike Division
3.
Road Mountain
Bike Bike
Division Division
Income from operations
Minimum acceptable return
Residual income
4.
Score:
Key Code:
Instructions
=
ROI
0%
[Key essay answer here]
[Key code here]
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FREE RIDE BIKE COMPANY
Divisional Income Statements
For the Year Ended December 31, 2016
Rate of Return (ROI) on Investment
ROI
=
x
=
Problem 23(8)-5B
Name:
Section:
Income from Operations
Sales
Invested Assets
x
=
x
=
An asterisk (*) will appear to the right of an incorrect entry in the income statement and above or below
elements in the equations. The essay answer will not be graded.
1.
Road Mountain
Bike Bike
Division Division
x
=
=
x
Sales 1,728,000$ 1,760,000$
Cost of goods sold 1,380,000 1,400,000
2.
Rate of Return (ROI) on Investment = Profit Margin x Investment Turnover
Sales
Road Bike Division
$172,800 $1,728,000
3.
Road Mountain
Bike Bike
Division Division
Income from operations 172,800$ 123,200$
4.
Score:
Instructions
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For the Year Ended December 31, 2016
FREE RIDE BIKE COMPANY
Divisional Income Statements
On the basis of income from operations, the Road Bike Division generated $49,600 ($172,800 –
$123,200) more income from operations than did the Mountain Bike Division. However, income
from operations does not consider the amount of invested assets in each division. On the basis
Problem 23(8)-5B
Name:
Solution
Section:
ON
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Income from Operations
Sales
Rate of Return (ROI) on Investment
Invested Assets
=
x
On the basis of income from operations, the Road Bike Division generated $49,600 ($172,800 –
dollar of invested assets, while the Mountain Bike Division earned 15.4 cents (15.4%) on each
dollar of invested assets. Although the profit margin of the Road Bike Division exceeds the
Mountain Bike Division (10.0% vs. 7.0%), the investment turnover in the Road Bike Division is
much less than the Mountain Bike Division (1.2 vs. 2.2). The combination of these factors
caused the Mountain Bike Division to have a higher return on investment than did the Road
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Enter a zero in cells you would otherwise leave blank.
1.
2.
3.
Consumer Commercial
Division Division Total
Sales:
14,400 units per unit
2,880 units per unit
21,600 units per unit
Total
Expenses:
Variable:
17,280 units per unit
2,880 units per unit
18,720 units per unit
Fixed
Total expenses
Income from operations
[Key code here]
Score:
Key Code:
Instructions
Problem 23(8)-6A
Name:
Section:
0%
Divisional Income Statements
For the Year Ended December 31, 2016
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GARCON INC.
[Key essay answer here]
[Key essay answer here]
4.
5.
a.
b.
[Key essay answer here]
[Key essay answer here]
[Key essay answer here]
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Enter a zero in cells you would otherwise leave blank.
1.
2.
3.
Consumer Commercial
Division Division Total
Sales:
14,400 units $144 per unit 2,073,600$ –$ 2,073,600$
2,880 units $115 per unit 331,200 – 331,200
Expenses:
Variable:
17,280 units $104 per unit 1,797,120$ –$ 1,797,120$
2,880 units $158 per unit – 455,040 455,040
The Consumer Division’s income from operations would increase by $31,680 [($115 – $104) × 2,880].
By selling to the Commercial Division, the Consumer Division earns $11 per unit on these sales. The
Commercial Division’s income from operations would increase by $100,800 [($150 – $115) × 2,880].
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For the Year Ended December 31, 2016
GARCON INC.
Divisional Income Statements
No. When unused capacity exists in the supplying division (the Consumer Division), the use of the
market price approach may not lead to the maximization of total company income.
Problem 23(8)-6A
Name:
Solution
Section:
ON
Score:
21,600 units $275 per unit – 5,940,000 5,940,000
4.
5.
a.
b.
Any transfer price greater than the Consumer Division’s variable expenses per unit of $104 but less
If the division managers cannot agree on a transfer price, a price of $127 would be the best
The Consumer Division’s income from operations would increase by $63,360 [($126 – $104) × 2,880].
By selling to the Commerical Division, the Consumer Division earns $22 per unit on these sales. The
Commerical Division’s income from operations would increase by $69,120 [($150 – $126) × 2,880]. By
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Enter a zero in cells you would otherwise leave blank.
1.
2.
3.
Semi- Navigational
conductors Systems Total
Sales:
2,240 units per unit
580 units per unit
3,675 units per unit
Total
Expenses:
Variable:
2,820 units per unit
580 units per unit
3,095 units per unit
Fixed
Total expenses
Income from operations
Problem 23(8)-6B
Name:
Section:
[Key essay answer here]
0%
[Key essay answer here]
Score:
Key Code:
Instructions
Divisional Income Statements
For the Year Ended December 31, 2016
[Key code here]
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EXOPLEX INDUSTRIES INC.
4.
5.
a.
b.
[Key essay answer here]
[Key essay answer here]
[Key essay answer here]
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Enter a zero in cells you would otherwise leave blank.
1.
2.
3.
Semi- Navigational
conductors Systems Total
Sales:
2,240 units $396 per unit 887,040$ –$ 887,040$
580 units $310 per unit 179,800 – 179,800
Expenses:
Variable:
2,820 units $232 per unit 654,240$ –$ 654,240$
580 units $350 per unit – 203,000 203,000
Score:
Instructions
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EXOPLEX INDUSTRIES INC.
Divisional Income Statements
No. When unused capacity exists in the supplying division (the Semiconductors Division), the use of
The Semiconductors Division’s income from operations would increase by $45,240 [($310 – $232) ×
580]. By selling to the Navigational Systems Division, the Semiconductors Division earns $78 per unit
on these sales. The Navigational Systems Division’s income from operations would increase by
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Problem 23(8)-6B
Name:
Solution
Section:
ON
For the Year Ended December 31, 2016
3,675 units $590 per unit – 2,168,250 2,168,250
4.
5.
a.
Any transfer price greater than the Semiconductors Division’s variable expenses per unit of $232 but
If the division managers cannot agree on a transfer price, a price of $332 would be the best
The Semiconductors Division’s income from operations would increase by $62,640 [($340 – $232) ×
580]. By selling to the Navigational Systems Division, the Semiconductors Division earns $108 per unit
on these sales. The Navigational Systems Division’s income from operations would increase by
An asterisk (*) will appear to the right of an incorrect entry.
Revenues
Cost of goods sold
Gross profit
Operating expenses
Income from operations before
service department charges
Less service department charges:
Tech Support Dept.
Purchasing Dept.
Inc
Income from operations
Score:
Key Code:
Instructions
Exercise 23(8)-7
Name:
Section:
0%
Consumer Division
Commercial Division
[Key code here]
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YOZAMBA TECHNOLOGY
Divisional Income Statements
For the Year Ended December 31, 2016
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Revenues 7,430,000$ 6,184,000$
Cost of goods sold 4,123,000 3,125,000
Gross profit 3,307,000$ 3,059,000$
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For the Year Ended December 31, 2016
YOZAMBA TECHNOLOGY
Divisional Income Statements
Consumer Division
Commercial Division
Score:
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Exercise 23(8)-7
Name:
Solution
Section:
ON
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Winter Summer
Sports Sports
Division Division
Sales
Cost of goods sold
Gross profit
Divisional expenses:
Divisional selling expenses
Divisional administrative expenses
Total
Income from operations before service department charges
Less service department charges:
Advertising expense
Transportation expense
Accounts receivable collection expense
Warehouse expense
Total
Income from operations
Supporting schedule:
Winter Summer
Sports Sports
Division Division Total
Advertising expense
Number of bills of lading
Transportation rate per bill of lading
Transportation expense
Number of sales invoices
Accounts recievable collection rate
Accounts receivable collection expense
Number of warehouse square feet
Warehouse rate per square foot
Warehouse expense
Divisional Income Statements
For the Year Ended December 30, 2016
Service Department Charges
[Key code here]
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XSPORT SPORTING GOODS CO.
Score:
Key Code:
Instructions
Exercise 23(8)-9
Name:
Section:
0%
An asterisk (*) will appear to the right of an incorrect entry.
Winter Summer
Sports Sports
Division Division
Sales 10,500,000$ 13,600,000$
Cost of goods sold
6,300,000 7,888,000
Divisional expenses:
Divisional selling expenses
1,680,000$ 1,904,000$
Divisional administrative expenses 1,050,000 1,210,400
Less service department charges:
Advertising expense 216,900$ 265,100$
Transportation expense 115,200 124,800
Accounts receivable collection expense
Warehouse rate per square foot
48,200 72,300
Supporting schedule:
Winter Summer
Sports Sports
Division Division Total
Advertising expense 216,900$ 265,100$ 482,000$
Number of sales invoices 9,640 14,460
Accounts recievable collection rate $5.00 $5.00
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Exercise 23(8)-9
Name:
Solution
Section:
Service Department Charges
Score:
Instructions
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For the Year Ended December 30, 2016
XSPORT SPORTING GOODS CO.
Divisional Income Statements
ON