Ch12Solutions - Chapter 12 Organizational Structure and...

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Chapter 12 Organizational Structure and Performance Measurement Brief Exercise 12-1 (10 minutes) (LO1 CC1) 1. A segment is a part or activity of an organization about which managers would like cost, revenue, or profit data. 2. Added responsibility and decision-making authority often result in increased job satisfaction . 3. A profit centre is a business segment whose manager is responsible for both cost and revenue but not over investment funds. 4. When one segment, such as a division of a company, provides goods or services to another segment of the company, the transfer price will determine how much revenue the segment recognizes on the transaction. 5. A cost centre is a business segment whose manager is responsible for costs but not over revenue or investment funds. 6. A responsibility centre is any segment of an organization whose manager is responsible and accountable for cost, revenue, or investment funds. 7. An investment centre is a business segment whose manager is responsible for cost, revenue, and investments in operating assets. 1
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Brief Exercise 12-3 (10 minutes) (LO2 CC4) 1. Sales : $60 × 20,000 = $1,200,000 Cost : $50 × 20,000 = $1,000,000 Net Income: $200,000 Margin = $200,000 ÷ $1,200,000 = 16.67% 2. Turnover = Sales ÷Average operating assets = $1,200,000 ÷ $900,000 = 1.33 3. ROI = Margin × Turnover = 16.67% × 1.33 = 22.17% Brief Exercise 12-5 (10 minutes) (LO2 CC6) Average operating assets (a) £2,800,000 Net operating income £ 600,000 Minimum required return: 18% × (a) 504,000 Residual income £ 96,000 Brief Exercise 12-7 (10 minutes) (LO2 CC6) Average operating assets (a) $200,000 Net operating income* 28,000 Minimum required return: 10% × (a) 20,000 Residual income $8,000 * Net operating income = ROI × average operating assets = 14% × $200,000 = $28,000 Brief Exercise 12-8 (10 minutes) (CC4, 5, 6)
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