Q1) Following information is provided for Alpha and Beta Divisions of Fraternity Corporation.
| |
Alpha |
Beta |
| Sales |
$600,000 |
$300,000 |
| Var. cost of goods sold |
200,000 |
150,000 |
| Fixed manufacturing costs |
50,000 |
40,000 |
| Variable selling |
30,000 |
5,000 |
| Fixed admin. (50% allocated) |
20,000 |
4,000 |
| Fixed selling. (20% allocated) |
50,000 |
30,000 |
| Assets at cost |
800,000 |
600,000 |
| Accumulated depreciation |
200,000 |
100,000 |
a. If Fraternity Corporation utilizes income to estimate division managers, calculate net income that must be used for that purpose given limited data above.
b. If Fraternity Corporation uses ROI to estimate division managers, and utilizes historical cost as investment base, calculate ROI for Alpha and Beta.