Scribd
Upload
15 views2 pages

Accounting Assignment Unit 7 Managerial Accounting

Uploaded by

thirishwezin71
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
15 views2 pages

Accounting Assignment Unit 7 Managerial Accounting

Uploaded by

thirishwezin71
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

Accounting Assignment Unit 7 Managerial Accounting

Pool Accessories, Inc., has two divisions—Furniture and Supplies. (This is the
same company as the previous exercise. This exercise can be assigned
independently.) Segmented income statement information for the most recent
fiscal year ended December 31 is shown as follows. Assume the Furniture
division had average operating assets totaling $6,500,000 for the year, and the
Supplies division had average operating assets of $1,750,000.

Pool Accessories, Inc.

Segmented Income Statements

For the Current Fiscal Year Ended December 31


Furniture Supplies
Division Division
Sales $3,000,000 $1,000,000
Cost of Goods Sold 1,600,000 430,000
Gross Margin $1,400,000 $570,000
Allocated Overhead 375,000 125,000
Selling and Administrative Expenses 250,000 200,000
Operating Income $775,000 $245,000
Income Tax Expense (30% rate) 232,500 73,500
Net Income $542,500 $171,500
Required:

a. Calculate ROI for each division. What does ROI tell us about each division?
Indicate why this measure is useful in evaluating investment centers.

a. Calculate ROI for each division.

ROI for furniture = Operating income / Average Operating Assets.

= (775,000 / 6,500,000).100%

= 11.92%

ROI for Supplies = Operating Income / Average Operating Assets

= (245,000/ 1,750,000).100%

= 14%

What does ROI tell us about each division?


The ROI of the cabinetwork division shows that it has the loftiest operating income compared to the$
542, 00 despite having a lower chance than the inventories. The ROI of the inventories division shows
that it has a lower operating income compared to the$ 245, 00 despite having a advanced chance than
the cabinetwork. The below rate shows that the inventories division has better performance in
comparison to the cabinetwork division. The maximization of profit depends on the investment of the
means, which is the responsibility of the directors.

Indicate why this measure is useful in assessing investment centers.

At Pool AccessoriesInc. the division of cabinetwork is larger than the division of inventories. When there
are six differences in the division, it’s not fair to compare the numbers grounded on the income, if so;
the lower division will always have the lower income. The net income of the cabinetwork division is
advanced than that of the net income of the inventories division. The operation reviewing the deals will
do a fairer review of the net income grounded on their performance if this measure is used in assessing
investment centers.( Heisinger & Hoyle, 2012)

References:

Heisinger, K., & Hoyle, J. B. (2012). Managerial Accounting. Creative Commons by-nc-sa 3.0.
https://open.umn.edu/opentextbooks/textbooks/managerial-accounting

You might also like