Managerial Accounts

a

578

Exercise 1 3-30 ROl anC Resldual lncomet

Annual Repods; Use of

Internet

Exercise 13-31

lncreasing FiOl over Time

Exercise 13-32 lnlernal Ccntrol

Exercise 1 3-33 lmprovirrg F0l

Chapter 13 lrivestnent Centers and iransfer Pricing

Required:

l. Calculate the tbllorving performance measures tix' 20r I lbr the Fairmont Division. 0. Retum on investment (ROI). D. Residual incoure.

Z. Would the managcment of Fairmont Division have been rnore likely to accept the investtnent opporfunityithatiin20xl ilresiduat :incomervereuscdasaperfotmancefileasureinsteadolROl'l

. tc..,e. Sho*'how

Sclcct o1e olthc tbllow ing oontpanies (or an1 conrpanl' oll r:tlr choosing) and use the llllsnlet to explore thc' colnpanl''s rttost reccnt annttal report.

Required:

1. f'alculate tlre companl,'s 3\erall retum oll itivestmenl (ROl). r\1so. calculate tlte cotltfltrt.r': overall residual i1c61re. (AssLure an impr-rtcd i,rtercst ratc r.li'10 percent.) [-ist anrj explain anl

assun.tptiotts y'r:u r.al'e.

Z. Doc,s the Lrontpan) itclude a calcuiation olROt in its online annLtal leport? Il'itdocs. do your' calculations agrec ilitli those oi'the cornpanl'7 lf'not. u,hat r,i'ouitl bc sottte possiblc erplirnations'.)

Reter tet Eshibit i3-,3. Assulre that 1ou arc a corrsullant *ho has Lrcen hired b1 Suncoast lrood Cclltcrs.

Fequired: \f'rite a mcmorandunr to the conrpanl prcsitlent explainirtg u'hy the ROI irased ur net book lirlue (int,xhibir LI 3)bchavesasitdocsolerthcfive-1.cartintcillriz-ott'

I)r\dL'1 Compall,is iut auto parts sup;rlier. At the encl oleach motrth. the entpiolec rvho trlainlaitrs all ol thr invenrorl, recorcls takes a phl,sical irtventory olthe firnt's stor:k. \\'lten discrepatlcies occur ircLrlccn

the recorcleil invent6rl'and the ph)'sical corlrt. the curplolee changes thc phlsical cotllll to agree tith ilre records.

Required:

l. $,hat prohlcrrs could arise as a re-sult olDryden contpanl''s inr,eilton'procc.dures? 2, liorvcouldthcintemal control sli-stetrbestrcngthenccl loelinrinatethepotcnrial problems'l

I-he tirllou,ing data perlain Ar tlritish lsles Aggicgates (iompan1. a producer ol'sand. grave:i. and cetrlcnt.

ibr the 1'r:ar.lust endcd.

rr u ri.aurericartai r. cottt

rl rl l. ileerc'.cour rvu'rr'. 1i restone.cont

ri u'rl.ihtl.crxl ir ri rr. p izzahut.cottt

* ri u.ri. 1 nclhatt.t.cont

ri u'rr.u al'tlart.cont

Sales revenue

Cost of goods sold

Average invested capita1,...,.,...........

t den0tes the Biitish pound sterllng, the national m0netary unlt 0f Great Britain

t2,000,000

t.t 00 000

800,000

1,000,000

7 {CMA, adapteU)