Exercise 22-19 The Ferrell Transportation Company uses a responsibility reportin
ID: 2529617 • Letter: E
Question
Exercise 22-19
The Ferrell Transportation Company uses a responsibility reporting system to measure the performance of its three investment centers: Planes, Taxis, and Limos. Segment performance is measured using a system of responsibility reports and return on investment calculations. The allocation of resources within the company and the segment managers’ bonuses are based in part on the results shown in these reports.
Recently, the company was the victim of a computer virus that deleted portions of the company’s accounting records. This was discovered when the current period’s responsibility reports were being prepared. The printout of the actual operating results appeared as follows.
Determine the missing pieces of information below. (Round intermediate calculations and final answers to 0 decimal places, e.g. 1,255.)
Planes
Taxis
Limos
$503,600
5,504,000
299,700
249,100
507,062
1,502,300
75,000
270,162
25,045,900
1,500,900
10
7
Planes
Taxis
Limos
Service revenue $$503,600
$ Variable costs5,504,000
299,700
Contribution margin249,100
507,062
Controllable fixed costs1,502,300
Controllable margin75,000
270,162
Average operating assets25,045,900
1,500,900
Return on investment10
%7
% %Explanation / Answer
Contribution margin=Service revenue-Variable costs
Contribution margin-Controllable Fixed costs=Controllable margin
ROI=Controllable margin/Average operating assets
Planes Taxis Limos Service revenue 9510890 503600 806762 Variable costs 5504000 254500 299700 Contribution margin 4006890 249100 507062 Controllable fixed costs 1502300 174100 236900 Controllable margin 2504590 75000 270162 Average operating assets 25045900 1071429(Approx) 1500900 ROI 10% 7% 18%Related Questions
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