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Unformatted text preview: Direct Fixed Expenses $6,720,000 $1,115,000 $990,000 Operating Income/Segment Margin $480,000 $260,000 $450,000 Average Assets $6,000,000 $2,000,000 $3,000,000 Required Rate of Return 12% 12% 12% Retail Stores Internet Catalog Sales Residual Income ($240,000) $20,000 $90,000 10-13 B (with the new manager system) Retail Stores Internet Catalog Sales $545,000 $325,000 $515,000 ($175,000) $85,000 $155,000 10-13 C If the new system will help increase ROI and the managers are evaluated on their ROI, then Retail stores will be looking into this system to up their ROI. Residual Income = Operating income - (Average Assets x Required Minimum Rate of Return) Operating Income (with the additional $65,000) Residual Income with the new system Buying the system only effected operating income (segment margin). By spending $500,000, we decreased cash by $500,00 but increased our property by $500,000 so Average Assets was not affected....
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This note was uploaded on 01/17/2012 for the course ACC 2304 taught by Professor Robinson during the Spring '08 term at Baylor.
- Spring '08
- Managerial Accounting