Complete Solution
Company A has a return on investment of 20% and Company B has a return on investment of 24%.
Assuming both companies have the same investment center average assets, which of the following
statements is true? - ANSWER - Company B has higher return on investment than Company A.
List the sections of a departmental expense allocation spreadsheet with the first section on top. -
ANSWER - Direct expenses
Indirect expenses
Service department expense
Total expense allocated to operate departments
A manufacturing division has $1,800,000 in average assets and income of $720,000. The company's
target rate is 8%. The division's residual income is $. - ANSWER - 720,000 -(1,800,000 * 8%) = 576,000
A retail store has 10,000 square feet of space and incurs rent costs of $5,000 per month. If Department
A uses 2,000 square feet of space, the amount of rent allocated to the department will be $. - ANSWER -
1000
Division ABC has $750,000 in average assets and $200,000 in income. Division XYZ has $800,000 in
average assets and $210,000 in income. The company's target rate is 10%. Which division has the
highest residual income? - ANSWER - Division XYZ with residual income of $130,000.
Which report is more effective in evaluating the performance of profit centers? - ANSWER -
Departmental contribution to overhead reports