Advantages of centralized organizations

Advantages of centralized organizations

1. Advantages of centralized organizations include include increased expertise at each division, quicker decisions, better use of time at top management levels, and increased motivation of division managers.TrueFalse2. A segment responsible for costs, revenues, and investment in assets is called an investment center.TrueFalse3. Economic Value Added is the dollar amount of division operating profit in excess of the division’s cost of acquiring capital to purchase its operating assets.TrueFalse4. The Return on Equity measure provides an assessment of how effectively each division is using operating assets to produce operating income.TrueFalse5. ROI can be calculated using two separate measures: operating profit margin and asset turnover (ROI = Operating profit margin x Asset turnover).TrueFalse6. Excluding allocated overhead has the effect of increasing ROI for each division manager and holds each division manager responsible only for expense amounts that are controllable.TrueFalse7. Manford Inc. has two divisions – Refrigerators and Dish Washer. Manford Company Segmented Income Statements For the Current Fiscal Year Ended December 31 Refrigerator Dish Washer Division DivisionSales $10,576 $5,600Cost of goods sold 4,873 2,024Gross marginAllocated overhead (from corporate) 938 712Selling and administrative expenses 868 376Operating incomeIncome tax expense (45%) 1,740 736Net income $ $ Using the segmented income statements, what is the profit margin ration for the Refrigerator Division? Answer tonearest two decimal places without any commas or words (e.g. 1.25 increase or 125%). Enter a negative number as -10 not (10).________?__________Response Feedback: profit margin ration = net income / sales8. Manford Inc. has two divisions – Refrigerators and Dish Washer. Manford Company Segmented Income Statements For the current Fiscal Year Ended December 31 Refrigerator Dish Washer Division DivisionSales $10,467 $5,882Cost of goods sold 4,810 2,249Gross marginAllocated overhead (from corporate) 911 653Selling and administrative expenses 819 412Operating incomeIncome tax expense (45%) 1,823 665Net income $ $Assume the Refrigerator Division has average operating assets totaling $24,766 for the year. What is the division’s return on investment? Answer to nearest two decimal places without any commas or words (e.g. 1.25 not 1.25 increase or 125%). Enter a negative number as -10 not (10).__________?_______Response Feedback: division return on investment = operating income / average total assets9. Manford Inc. has two divisions – Refrigerators and Dish washer. Manford Company Segmented Income Statements For the Current Fiscal Year Ended December 31 Refrigerator Dish Washer Division DivisionSales $10,054 $5,980Cost of goods sold 4,243 1,702Gross marginAllocated overhead (from corporate) 871 646Selling and administrative expenses 860 409Operating incomeIncome tax expense (45%) 1,801 705Net income $ $Assume the Refrigerator Division has average operating assets totaling $6,543 for the year and the company’s cost of capital rate is 13 percent. what is the residual income for the Refrigerator division? Answer to nearest whole dollar without any commas, decimal points, or words (e.g. 1000 not 1,000.00 or increase 1000). Enter a negative number as -10 not (10)._______?_________Response Feedback: division residual income = division operating income – (average division assets x company’s cost of capital)10. Katsen Company can sell its products to an external market for $182 per unit. The division’s variable manufacturing costs are $56 per unit and fixed manufacturing costs are $15 per unit. If the division is operating at full capacity, what would be the opportunity cost of selling internally?_______?_______Response Feedback: The opportunity costs would be sales price – variable costs.


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