131. Alexander Bruce and Jonathon Wayne are managers of two product lines for Gotham Incorporated. One of them is a candidate for promotion based on performance. Using the following data:
a. Calculate the residual income (assume a target income of 10% return on assets) and the investment center return on assets.
b. Indicate which manager should be recommended for promotion and why.
Bruce
Wayne
Revenue
$205,000
$270,000
Costs
189,000
232,000
Average assets
300,000
290,000
132. Renton Co. has two operating (production) departments supported by a number of service departments. The following information was collected for a recent period:
Direct Costs
Machining
Assembly
Indirect
Department
Cost
Salaries
$122,400
$ 85,700
$36,700
Insurance
20,200
11,000
5,500
Utilities
23,900
13,900
2,000
Depreciation
20,700
11,500
13,800
Maintenance
7,000
4,700
29,400
Office expenses
-0-
71,100
Cost of goods sold
327,600
121,200
Indirect costs are allocated as follows: salaries on the basis of sales, office expenses on the basis of the number of employees, and all other costs on the basis of square footage. Additional information about the production departments follows:
Square
Number of
Footage
Employees
14,535
78
4,845
52
Sales for the Machining Department are $724,404 and sales for the Assembly Department are $356,796. Determine the departmental contribution to overhead and the departmental net income for each production department.
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