ManagerialAccounting-OP_x3x7rSO-104

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B Problem Set B
PB1. 9.3 Use the following information to answer the questions that follow.
A. Calculate the operating income percentage for each of the stores. Comment on how your analysis has
changed for each store.
B. Perform a vertical analysis for each store. Based on your analysis, what accounts would you want to
investigate further? How might management utilize this information?
C. Which method of analysis (using a dollar value or percentage) is most relevant and/or useful? Explain.
PB2. 9.3 Use Kellogg’s 2017 annual report (https://openstax.org/l/50Kellogg2017) to answer the following
questions.
A. Using the information for Kellogg, calculate the operating profit percentage for each of the divisions.
Comment on how your analysis has changed compared to your analysis of the dollar amounts for each
division.
B. Using total assets as the investment, calculate the ROI for each division. In the total assets information
you compile, you should ignore corporate and elimination entries amounts and you will also need to
combine the U.S. divisions into a North American total. Comment on the results.
C. Assume that Kellogg uses a cost of capital of 10%. Calculate the RI for each of the divisions (you will
need to condense the U.S. divisions into a North American total). Comment on the results.
506 Chapter 9 Responsibility Accounting and Decentralization
This OpenStax book is available for free at http://cnx.org/content/col25479/1.11
https://openstax.org/l/50Kellogg2017
PB3. 9.3 The income statement comparison for Rush Delivery Company shows the income statement for
the current and prior year.
A. Determine the operating income (loss) (dollars) for each year.
B. Determine the operating income (percentage) for each year.
C. The company made a strategic decision to invest in additional assets in the current year. These
amounts are provided. Using the total assets amounts as the investment base, calculate the ROI. Was
the decision to invest additional assets in the company successful? Explain.
D. Assuming an 8% cost of capital, calculate the RI for each year. Explain how this compares to your
findings in part C.
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PB4. 9.3 Assume you are the manager for the semi-trucks division at the Speedy Delivery Company. The
semi-truck division is a cost center and you are reviewing the driver overtime costs for the previous year,
shown here:
A. Microsoft Excel or another spreadsheet application, create a line chart with markers showing the driver
overtime expense. Describe your observations.
B. Knowing that safety is important in your industry and weather plays a significant role in the safety of
drivers, you decide to talk with the safety manager and obtained the following information:
Using Microsoft Excel or another spreadsheet application, create individual line charts with markers showing
the average snowfall and non-company highway accidents. Describe your observations and actions you might
consider.
PB5. 9.4 Financial information for Lighthizer Trading Company for the fiscal year-ended September 30,
20xx, was collected. As part of a management training session, you have been asked to prepare an income
statement format that will be used to distribute to management. Subtotals and totals are included in the
information, but you will need to calculate the values.
A. In the correct format, prepare the income statement using this information:
B. Calculate the profit margin, return on investment, and residual income. Assume an investment base of
$42,000 and 8% cost of capital.
C. Prepare a short response to accompany the income statement that explains why uncontrollable costs
are included in the income statement.
508 Chapter 9 Responsibility Accounting and Decentralization
This OpenStax book is available for free at http://cnx.org/content/col25479/1.11
PB6. 9.4 Using the information for Lighthizer Trading Company, prepare the income statement to include
all costs, but separate out uncontrollable costs. Insert subtotals where appropriate (include one for operating
income) before the uncontrollable costs. Income tax expense should be based on all expenses (that is, it will
be the same amount as in the previous exercise). Calculate net income, profit margin, ROI, and RI excluding
uncontrollable expenses. Prepare a short response to accompany the income statement that explains why
uncontrollable costs are separated in the income statement.
PB7. 9.4 Management of Green Peak Tea Company has asked you, the controller, to develop a transfer
pricing system for the company. The Brewing Department of the company sells all of its product to the
Bottling Department of the company. Thus the Brewing Department’s sales become the Bottling
Department’s cost of goods sold. In order to determine an optimal transfer pricing system, management
would like you to demonstrate what an income statement would look like under a cost, market, and
negotiated transfer pricing structure. These various transfer prices are listed as follows. Prepare an income
statement for each of the transfer prices by filling in the missing numbers in the provided income statement
based on each transfer price (thus four different income statements) and calculate the operating income/loss
percentage. Prepare a brief summary of the results.
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PB8. 9.4 The following revenue data were taken from the December 31, 2017, General Electric annual report
(10-K):
For each segment and each year, calculate intersegment sales (another name for transfer sales) as a
percentage of total sales. Using Microsoft Excel or another spreadsheet application, create a clustered column
graph to show the 2016 and 2017 percentages for each division. Comment on your observations of this data.
How might a division sales manager use this data?
510 Chapter 9 Responsibility Accounting and Decentralization
This OpenStax book is available for free at http://cnx.org/content/col25479/1.11
	Chapter 9. Responsibility Accounting and Decentralization
	Problem Set B