Chapter 22: Q6DQ (page 1012)
How are decisions made in decentralized organizations?
Decisions in the decentralized organization are made at thelower or middle management level.
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A retailer pays $130,000 rent each year for its two-story building. The space in this building is occupied by five departments as specified here.
Department | Square feet occupied |
Jewelry | 1,440 (First floor) |
Cosmetics | 3,360 (First floor) |
Housewares | 2,016 (Second floor) |
Tools | 960 (Second floor) |
Shoes | 1,824 (Second floor) |
The company allocates 65% of total rent expense to the first floor and 35% to the second floor, and then allocates rent expense for each floor to the departments occupying that floor on the basis of space occupied. Determine the rent expense to be allocated to each department. (Round percents to the nearest one-tenth and dollar amounts to the nearest whole dollar.)
Question: In each blank next to the following terms, place the identifying letter of its best description.
1. Cost center | A. Incurs costs without directly yielding revenues. |
2. Investment center | B. Provides information used to evaluate the performance of a department. |
3. Departmental accounting system | C. Holds manager responsible for revenues, costs, and investments. |
4. Operating Department | D. Engages directly in manufacturing or in making sales directly to customers. |
5. Profit center | E. Does not directly manufacture products but contributes to profitability of the entire company. |
6. Responsibility accounting system | F. Incurs costs and also generates revenues |
7. Service department | G. Provides information used to evaluate the performance of a department manager |
BTN 22-2 Apple and Google compete in several product categories. Sales, income, and asset information are provided for fiscal year 2015 for each company below.
\( millions | Apple | |
Sales | \)233,715 | \(74,989 |
Net income | \)53,394 | $16,348 |
Invested assets at, beginning of the year | 231,839 | 129,187 |
Invested assets, end of the year | 290,479 | 147,461 |
Required
1. Compute profit margin for each company.
2. Compute investment turnover for each company.
Analysis Component
3. Using your answers to the questions above, compare the companies’ performance for the year.
Midwest Mfg. uses a balanced scorecard as part of its performance evaluation. The company wants to include information on its sustainability efforts in its balanced scorecard. For each of the sustainability items below, indicate the most likely balanced scorecard perspective it relates to. Label your answers using C (customer), P (internal process), I (innovation and learning), or F (financial).
1. CO2 emissions | 6. Pounds of trash diverted from landfill |
2. Number of solar panels installed | 7. Dollar sales of green products |
3. Gallons of water used | 8. Number of sustainability training workshops held |
4. Customer surveys of company’s sustainability reputation | 9. Cubic feet of natural gas used |
5. Pounds of recyclable packaging used | 10. Patents for green products applied for |
Refer to the data and information in Problem 4-5B.
Required
Prepare and complete the entire 10-column worksheet for Foster Products Company. Follow the structure of Exhibit 4B.1 in Appendix 4B.
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