Alyeska services company a division of a major oil company

Complete homework exercises in Word or Excel.

Chapter Twelve exercises 1, 2, 3, 6, 8

EXERCISE 12–1 Compute the Return on Investment (ROI) [LO 12–1]

Alyeska Services Company, a division of a major oil company, provides various services to the operators of the North Slope oil field in Alaska. Data concerning the most recent year appear below:

Sales. . . . . . . . . . . . . . . . . . .

$7,500,000

Net operating income. . . . . . .

$600,000

Average operating assets . . . .

$5,000,000

Required:

1. Compute the margin for Alyeska Services Company.

2. Compute the turnover for Alyeska Services Company.

3. Compute the return on investment (ROI) for Alyeska Services Company.

EXERCISE 12–2 Residual Income [LO 12–2]

Juniper Design Ltd. of Manchester, England, is a company specializing in providing design services to residential developers. Last year the company had net operating income of $600,000 on sales of $3,000,000. The company’s average operating assets for the year were $2,800,000 and its minimum required rate of return was 18%.

Required:

Compute the company’s residual income for the year.

EXERCISE 12–3 Measures of Internal Business Process Performance [LO 12–3]

Management of Mittel Rhein AG of Koln, Germany, would like to reduce the amount of time between when a customer places an order and when the order is shipped. For the first quarter of operations during the current year the following data were reported:

Inspection time. . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.3 days

Wait time (from order to start of production). . . .

14.0 days

Process time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.7 days

Move time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.0 days

Queue time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

 5.0 days

Required:

1. Compute the throughput time.

2. Compute the manufacturing cycle efficiency (MCE) for the quarter.

3. What percentage of the throughput time was spent in non-value-added activities?

4. Compute the delivery cycle time.

5. If by using Lean Production all queue time during production is eliminated, what will be the new MCE?

EXERCISE 12–6 Contrasting Return on Investment (ROI) and Residual Income [LO 12–1, LO 12–2]

Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow:

Division

Osaka

Yokohama

Sales. . . . . . . . . . . . . . . . . . . .

$3,000,000

$9,000,000

Net operating income . . . . . .

$210,000

$720,000

Average operating assets . . .

$1,000,000

$4,000,000

Required:

1. For each division, compute the return on investment (ROI) in terms of margin and turnover. Where necessary, carry computations to two decimal places.

2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 15%. Compute the residual income for each division.

3. Is Yokohama’s greater amount of residual income an indication that it is better managed? Explain.

EXERCISE 12–8 Computing and Interpreting Return on Investment (ROI) [LO 12–1]

Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below:

Division

Queensland

New South Wales

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,000,000

$7,000,000

Average operating assets . . . . . . . . . . .

$2,000,000

$2,000,000

Net operating income . . . . . . . . . . . . . . . .

$360,000

$420,000

Property, plant, and equipment (net) . . . .

$950,000

$800,000

Required:

1. Compute the rate of return for each division using the return on investment (ROI) formula stated in terms of margin and turnover.

2. Which divisional manager seems to be doing the better job? Why?