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prisoha [69]
3 years ago
6

As indicated in the chapter, return on investment (ROI) is well entrenched in business practice. However, its use can have negat

ive incentive effects on managerial behavior. For example, assume you are the manager of an investment center and that your annual bonus is a function of achieved ROI for your division. You have the opportunity to invest in a project that would cost $550,000 and that would increase annual operating income of your division by $50,000. (This level of return is considered acceptable from top management’s standpoint.) Currently, your division generates annual operating profits of approximately $625,000, on an asset base (i.e., level of investment) of $4,150,000.
Required:

1. What is the current return on investment (ROI) being realized by your division (i.e., before considering the new investment)?

2. What would happen to the near-term ROI of your division after adding the effect of the new investment?

3. As manager of this division, given your incentive compensation plan, would you be motivated to make the new investment?
Business
1 answer:
Juliette [100K]3 years ago
6 0

Answer:

ROI = net profit / total investment

1. What is the current return on investment (ROI) being realized by your division

  • ROI = $625,000 / $4,150,000 =  15.06%

2. What would happen to the near-term ROI of your division after adding the effect of the new investment?

  • ROI = ($625,000 + $50,000) / ($4,150,000 + $550,000) =  14.36%

If you carry out the new project the ROI of your division will decrease.

3. As manager of this division, given your incentive compensation plan, would you be motivated to make the new investment?

  • Even though the new project's return (9.1%) is considered acceptable by upper management, you will probably reject it since it will decrease your division's total ROI. When managers are assigned bonuses based on certain achievements, reducing your profitability ratio will probably result in no bonus.
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Answer:

Damien Carranza

Gross pay = $1.494.17

Explanation:

a) Data and Calculations:

Base annual salary = $31,750

Weekly base hours = 40 hours

We assume that there are 52 weeks in a calendar year.

Hourly rate = $31,750/(52 weeks * 40 hours) = $15.26442 per hour

Overtime worked = 4 hours

Overtime rate = 4 * $31,750/2,080 * 1.5 = $91.59

Weekly base pay = 40 * $31,750/2,080 = 610.58

Commission = $26,400 * 3% =                 792.00

Gross pay =                                            $1,494.17

b) Since Damien is a non-exempt employee, he is entitled to earn the federal minimum wage and qualify for overtime pay.  This is calculated as one-and-a-half times his hourly rate, for every hour worked above and beyond the standard 40-hour workweek.  The gross pay is Damien's total earnings throughout the week before deductions for mandated taxes, health insurance, retirement, and Medicare contributions are made.

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3 years ago
Georgia Products Inc. completed and transferred 163,000 particle board units of production from the Pressing Department. There w
Lerok [7]

Answer:

Pressing Department. Round "cost per equivalent unit" answers to the nearest cent.

a. Total conversion cost $

b. Conversion cost per equivalent unit $

c. Direct materials cost per equivalent unit $

a. Total conversion cost                     252.900

b. Conversion cost per equivalent unit  0.61

c. Direct materials cost per equivalent unit  3.20

Explanation:

Solution

a. Total conversion cost                     252.900

b. Conversion cost per equivalent unit  0.61

c. Direct materials cost per equivalent unit  3.20

Statement of Equivalent Units(Weighted average)

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Cost per Equivalent Units      3.20                 0.61             3.81

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