Final Exam Review - ACC 202 Mon 4/27/09 Review for Final...

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8/11/09 ACC 202 Mon 4/27/09 Review for Final Exam Today: CH 13 and CHs 1-6 Wednesday: CHs 11 and 12 and CHs 7-10
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8/11/09 ACC 202 Mon 4/27/09 Review for Final Exam When: Wed. May 6, 2009, 8-10pm Where: one of three rooms (see chart on next page, also on Angel) What (format): 30 multiple choice questions ½ on CH 11-12-13; ½ on CH 2-10 25% word answers; 75% computations
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8/11/09 Grades Class averages at this point are approximately (we have many checks to do): Homework 48.25 pts/50 pts Quizzes 65.2 pts/80 pts EX 1 79 pts/100 pts EX 2 70.4 pts/100 pts iClicker 16.7/20 pts Note that the averages on Angel for Homework, Quizzes, and iClickers will be lower that our official gradebook because it doesn’t consider dropping lowest scores, converting iClicker points, and includes
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8/11/09 CH 11 Segment Reporting and Decentralization Hold people responsible only for what they can control; that is, only the direct or traceable costs of that segment Calculate a “ segment margin ” by subtracting traceable fixed costs from contribution margin Good metrics for evaluating a segment:
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8/11/09 CH 11 ROI Return on Investment (ROI) = Net operating income Average operating assets or ROI = Margin X Turnover Net operating Income Sales Sales Average operating assets To improve ROI: Increase sales Reduce operating expenses Reduce operating assets
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8/11/09 Example of ROI: One division of a corporation had total sales of $7,940,000, net operating income of $254,080, and average operating assets of $2,000,000 for the prior year. The company’s minimum required rate of return is 12%. The division’s margin is closest to ($254,080/$7,940,000): A) 3.2% B) 25.2% C) 12.7% D) 28.4% The division’s turnover is closest to ($7,940,000/$2,000,000): A) 0.13 B) 3.52 C) 3.97 D) 31.25 The division’s return on investment (ROI) is closest to (3.2% * 3.97):
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8/11/09 CH 11 Residual Income Residual Income = Net Operating Income (Av. Operating Assets * Min. Required Rate of Return) DEFINITIONS: Net operating income = IBIT or EBIT; income (or earnings) before interest and taxes Average operating assets = assets used in the operations of the business (such as, cash, accounts receivable, inventory, plant and equipment). Does not include assets that are held for investment (such as, land)
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8/11/09 Example of Residual Income: Data for last year for one division of a company were: Sales $2,000,000 Variable expenses $800,000 Traceable fixed expenses $900,000 Average operating assets $500,000 Minimum required rate of return 20% The traceable fixed expenses do not include any interest expense. How much is the residual income ?
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Click to edit Master subtitle style 8/11/09 CH 12 Relevent Costs, Decisions Drop this segment or retain it ? Drop it if the segment margin is negative. Ignore allocated common costs . Make or buy this component part? Buy the component if your relevant costs are greater than the outside vendor’s price.
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Final Exam Review - ACC 202 Mon 4/27/09 Review for Final...

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