Ch_12_Class_Notes

Ch_12_Class_Notes - 1 Speaker5pmtoday 2 3 ChangeinSchedule...

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1.  Speaker 5pm today 2.  Tuesday – Exam Four checklist 3.  Change in Schedule Transfer Pricing Wednesday Chapter 12 – Decentralization 1.Cost Centers 2.Profit Centers 3.Investment Centers
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RETURN ON INVESTMENT Investment centers are often evaluated based on their return on  investment (ROI), which is computed as follows: Net operating income ROI Average operating assets = or ROI = Margin × Turnover where: Net operating income Margin =  Sales Sales Turnover =  Average operating assets EXAMPLE: Royal Watercraft Company reports the following data for  last year’s operations: Net operating income. .......... $30,000 Sales. ................................... $500,000 Average operating assets. ... $200,000
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$30,000 $500,000 ROI =   ×   = 6% × 2.5 = 15% $500,000 $200,000 To increase ROI, at least one of the following must occur: 1. Increase sales. 2. Reduce expenses. 3. Reduce operating assets. RETURN ON INVESTMENT (continued) Example 1—Increase sales: Assume that Royal Watercraft Company is able to increase sales 
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This note was uploaded on 10/20/2011 for the course ACC 222 taught by Professor Brewer during the Spring '08 term at Miami University.

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Ch_12_Class_Notes - 1 Speaker5pmtoday 2 3 ChangeinSchedule...

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