ACCOUNTING

1.
eBookeBookeBookeBookExercise 12-19
Types of Responsibility Centers

For each of the independent scenarios, indicate the type of responsibility center involved (cost, revenue, profit, or investment).

  1. Terrin Belson, plant manager for the laser printer factory of Compugear Inc., brushed his hair back and sighed. December had been a bad month; two machines had broken down, and some factory production workers (all on salary) were idled for part of the month. Materials prices increased, and insurance premiums on the factory increased. No way out of it; costs were going up. He hoped that the marketing vice president would be able to push through some price increases, but that really wasn’t his department.
    _________________
  2. Joanna Pauly was delighted to see that her ROI figures had increased for the third straight year. She was sure that her campaign to lower costs and use machinery more efficiently (enabling her factories to sell several older machines) was the reason why. Joanna planned to take full credit for the improvements at her semiannual performance review.
    _________________
  3. Gil Rodriguez, sales manager for ComputerWorks, was not pleased with a memo from headquarters detailing the recent cost increases for the laser printer line. Headquarters suggested raising prices. “Great,” thought Gil, “an increase in price will kill sales and revenue will go down. Why can’t the plant shape up and cut costs like every other company in America is doing? Why turn this into my problem?”
    _________________
  4. Susan Whitehorse looked at the quarterly profit/loss statement with disgust. Revenue was down, and cost was up—what a combination! Then she had an idea. If she cut back on maintenance of equipment and let a product engineer go, expenses would decrease—perhaps enough to reverse the trend in income.
    _________________
  5. Shonna Lowry had just been hired to improve the fortunes of the Southern Division of ABC Inc. She met with top staff and hammered out a three-year plan to improve the situation. A centerpiece of the plan is the retiring of obsolete equipment and the purchasing of state-of-the-art, computer-assisted machinery. The new machinery would take time for the workers to learn to use, but once that was done, waste would be virtually eliminated.
    _________________

2.

Cornerstone Exercise 12-13 (Algorithmic)
Calculating Average Operating Assets, Margin, Turnover, and Return on Investment

East Mullett Manufacturing earned operating income last year as shown in the following income statement:

Sales $531,250
Cost of goods sold 280,000
Gross margin $251,250
Selling and administrative expense 181,700
Operating income $69,550

At the beginning of the year, the value of operating assets was $390,000. At the end of the year, the value of operating assets was $460,000.

For East Mullett Manufacturing, calculate the following:

1. Average operating assets $   _________________
2.  Margin (round to the nearest whole percent)   _________________ %
3. Turnover (round to two decimal places)   _________________
4. Return on investment   _________________ %

3.
eBookeBookeBookeBook SpreadsheetSpreadsheetSpreadsheetSpreadsheetExercise 12-20
Margin, Turnover, Return on Investment

You may use the attached spreadsheet to help you complete this activity, but you are not required to do so. You will find the spreadsheet by clicking on the link in the drop-down menu above.

Pelak Company had sales of $30,000,000, expenses of $27,600,000, and average operating assets of $6,000,000.

1.  Compute the operating income.
$     _________________

2.  Compute the margin (as a percent) and turnover ratio.

Margin :   _________________   %
Turnover :   _________________

3.  Compute the ROI as a percent.
_________________   %


4.

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