题目

 Division Y of Chardonnay currently has capital employed of $100,000 and earns an annual profit after depreciation of $18,000. The divisional manager is considering an investment of $10,000 in an asset which will have a ten-year life with no residual value and will earn a constant annual profit after depreciation of $1,600. The cost of capital is 15%. 

Calculate the following and comment on the results. 

(i) The return on divisional investment before and after the new investment 

(ii) The divisional residual income before and after the new investment 

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考点:Chapter17Divisionalperformanceandtransferpricing

 (i) Return on divisional investment (ROI)  

                                                                   Before investment                          After investment 

Divisional profit                                              $18,000                                         $19,600 

Divisional investment                                 $100,000                                       $110,000 

Divisional ROI                                                  18.0%                                            17.8% 

The ROI will fall in the short term if the new investment is undertaken. This is a problem which often arises with ROI, as noted in part (a) of this solution. 

(ii) Divisional residual income 

The residual income will increase if the new investment is undertaken. The use of residual income has highlighted the fact that the new project returns more than the cost of capital (16% compared with 15%). 


多做几道

 Actual overheads cost $180,000 and 40,000 machine hours were worked. 

Actual overheads cost $170,000 and 40,000 machine hours were worked. 

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5

【论述题】

Prepare profit statements for each period and for the two periods in total using both absorption costing and marginal costing. 

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6

【论述题】

Prepare profit statements for each of the six-monthly periods, using the following methods of costing. 

Marginal costing 

Prepare profit statements for each of the six-monthly periods, using the following methods of costing. 

Absorption costing 

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