Cornerstones of Cost Management Study Set 4
Quiz 10 :
The sales, operating income and the operating assets of the small appliances division and cleaning products division of Forchen, Inc. is given in the question. 1. (a)For small appliances division: b. c. d. 2. (a)For the cleaning products division:- b. c. d. 2.The new operating income is lower; therefore, both margin and ROI would be lower. Average operating assets and turnover would be unaffected, since operating income is not a part of the equations for them. New margin is calculated as, New ROI is calculated as, Hence, the new return on investment (ROI) is
Decentralization: • Decentralization is a form of delegation of authority, whereby lower level managers are authorized to take decisions and to practice the same. • Hence, we can say immediate and ultimate decisions pertaining to concerned department, are taken by lower level departmental head that is manager. Identify the difference between decentralized and centralized decision-making: • However, In case of centralized system, top-level managers make fundamental decisions and managing director and the duty of lower-level managers is only to act accordingly. • However, under decentralized form of organization decision making authority and responsibility retains with the lower managers.
The sales, operating income and the operating assets of the small appliances division and cleaning products division of Forchen, Inc. is given in the question number 1. Now it requires an 8% minimum rate of return. 1.Residual income for Small Appliances Division (SAD) The retail income for SAD is 2.Residual income for cleaning products division The residual income for cleaning products division is 3.If the minimum rate of return was 9%, the residual income of both divisions would be lower. Residual income for small appliances division is, Residual income for cleaning products division is, Hence, with the minimum rate of return of 9%, the residual income for small appliances is and the residual income for cleaning products division is
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