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Direction to Honour’s & Masters

BBA (Hon's) 3rd Year

Advanced Accounting - 1
Lecture Sheet - 06

Accounting for Operating Segments (IFRS 8)

Student’s Details

Name : .....................................................................................................
Roll : ......................................
Session :.......................................
Department : ......................... Year : ..........................................
Institution : ..............................................................................................
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Part A&B
1. 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 Tk. 6,00,000 on sales of Tk.
30,00,000. The company’s average operating assets for the year were Tk. 28,00,000 and its minimum
required rate of return was 18%.
Required: Compute the company’s residual income for the year.
2. (Missing amount)
Fill in the following blanks:
Segments in Same Company
A B C
Revenues 10,00,000 5,00,000 ?
Net operating income 1,00,000 50.000 ?
Investment 5,00,000 ? 50,00,000
Income as a parentage of revenues ? ? 0.5%
Investment turnover ? ? 2
ROI ? 1% ?
3. For its three investment centers, Paiga Company accumulates the following data:
I II III
Sales 2,00,000 3,00,000 4,00,000
Controllable margin 1,20,000 2,00,000 3,20,000
Average operating assets 5,00,000 8,00,000 10,00,000
Required:
1. Compute the return on investment (ROI) for each center.
4. (Missing amount)
Bishal Company has three divisions which are operated as profit center. Actual operating data for the
division are as follows:
Operating data Women’s Men’s Children’s
Shoes shoes shoes
Contribution margin 2,40,000 (3) 1,80,000
Controllable fixed costs (Traceable fixed costs) 1,00,000 (4) (5)
Controllable Margin (NOI) (1) 90,000 96,000
Sales 6,00,000 4,50,000 (6)
Variable costs (2) 3,30,000 2,50,000
Instructions:
1. Compute the missing amounts, show computations.
5. (Segmented Income Statement)
Royal Lawncare Company produces and sells two packaged products, Weedban and Greengrow.
Revenue and cost information relating to the products follow:
Product
Weedban Greengrow
Selling price per unit Tk.6.00 Tk. 7.50
Variable expense per unit Tk. 2.40 Tk. 5.25
Traceable fixed expenses per year Tk. 45,000 Tk. 21,000

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Common fixed expenses in company total Tk. 33,000 annually. Last year the company produced and
sold 15,000 units of Weedban and 28,000 units of Greengrow.
Required:
1. Prepare a contribution format income statement segmented by product lines.

6. The magnetic imaging division of medical of medical diagnostics, Inc, has reported the following
reports for last year’s opeartions:
Sales Tk. 2,50,000
Net operating income Tk. 30,000
Average operating assets Tk. 1,00,000
Required:
1. Compute the magnetic imaging division’s margin, turnover and ROI.
2. Top management of medical diagnostics has set a minimum required rate of return on average
operating assets of 25%. What is the residual income?
7. Meji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama.
Selected data on the two division follow (in millions of yen, denoted by Tk.):

Division
Osaka Yokohama
Sales Tk.30,00,000 Tk. 90,00,000
Net operating income Tk. 2,10,000 Tk. 7,20,000
Average operating assets Tk. 10,00,000 Tk. 40,00,000
Required:
1. For each division, compute the return on investment (ROI) in terms of margin and turnover.
Where necessary, carry computations to two places.
2. Assume that the company evaluates performance using residual income and that the return of any
division is 15%. Compute the residual income for each division.
3. Is Yokohama’s greater amount of residual income and indication that it is better managed?
Explain.
8. Selected operating data for two divisions of Outback Brewing, Ltd, of Australia are given below.
Division
Queensland New South Wales
Sales Tk.40,00,000 Tk. 70,00,000
Average operating assets Tk. 20,00,000 Tk. 20,00,000
Net operating income Tk. 3,60,000 Tk. 4,20,000
Property, plant and equipment (net) Tk. 9,50,000 Tk. 8,00,000
Required:
1. Compute the rate of return for each division using the return on investment (ROI) formula in
terms of margin and turnover.
2. Which divisional manager seems to be doing the better job? Why?
9. From the following table, determine missing data:
Division
A B
Sales Revenue Tk. ? Tk. 40,00,000
Net Operating Income (NOI) Tk. ? Tk. 3,60,000
Average Operating Assets Tk. 6,00,000 Tk. ?
Margin 8% ?
Turnover 4 Times 5 Times

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10. Provide the missing data in the following table for a distributor of material arts product.
Division
Alpha Bravo Charlie
Sales Tk.? Tk. 1,15,000 Tk.?
Net operating income Tk.? Tk. 9,20,000 Tk. 2,10,000
Average operating assets Tk. 8,00,000 Tk.? Tk.?
Margin 4% ? 7%
Turnover 5 ? ?
Return on investment(ROI) ? 20% 14%
Yellow division of Tuny Company reported the following data for the current year:
Tk.
Sale 30,00,000
Variable 19,50,000
Controllable fixed costs 6,00,000
Average operating assets 50,00,000
Top management in unhappy with the investment center’s return on investment (ROI). It asks the
manager of the yellow division to submit plans to improve ROI in the next year. The manager believes it
is feasible to consider the following independent courses of action:
11. Yellow division of Tuny Company reported the following data for the current year:
Tk.
Sale 30,00,000
Variable 19,50,000
Controllable fixed costs 6,00,000
Average operating assets 50,00,000
Top management in unhappy with the investment center’s return on investment (ROI). It asks the
manager of the yellow division to submit plans to improve ROI in the next year. The manager believes it
is feasible to consider the following independent courses of action:
Increase sales by 3,20,000 with no change in the contribution margin percentage.
2. Reduce variable costs by 1,00,000.
3. Reduce average operating assets by 4%
Instructions:
1. Compute the return on investment (ROI) for the current year.
2. Using the ROI formula, compute the ROI under each of the proposed courses of action.
12. Selected sales and operating data for three divisions of different structural engineering firms are given
follows:
Division A Division B Division C
Sales Tk. 1,20,00,000 Tk. 1,40,00,00 Tk. 2,50,00,000
Average operating assets Tk. 30,00,000 Tk. 70,00,000 Tk. 50,00,00
Net operating assets Tk. 6,00,000 Tk. 5,60,000 Tk. 8,00,00
Minimum required rate of return 14% 10% 16%
Required:
1. Compute the return on investment (ROI) for each division using the formula stated in terms of
margin and turnover.
2. Compute the residual income for each division.
3. Assume that each division is presented with an investment opportunity that would yield a 15%
rate of return.
(a) If performance is being measured by ROI, which division or divisions will probably accept the
opportunity? Reject? Why?
(b) If performance is being measured by residual income, which division or divisions will probably
the opportunity? Reject? Why?

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13. Pecs Alley is a regional chain of health clubs. The managers of the clubs, who have authority to make
investments as needed, are evaluated based largely on return on investment (ROI). The Springfield Club
reported the following results for the past year:
Sales................................................... Tk. 14,00,000
Net operating income ............................ Tk. 70,000
Average operating assets .................... Tk. 3,50,000
Required: The following question are to be considered independently. Carry out all computations to
two decimal places.
1. Compute the club’s return on investment (ROI).
2. Assume that the manager of the club is able to increase sales by Tk. 70,000 and that, as a result
net operating income increases by Tk. 18,200. Further assume that this is possible without any
increase in operating assets. What would be the club’s return on investment (ROI)?
3. Assume that the manager of the club is able to reduce expenses by Tk. 14,000 without any
change in sales or operating assets. What would be the club’s returns on investment (ROI)?
4. Assume that the manager of the club is able to reduce operating assets by Tk. 70,000 without any
change is sales or net operating income. What would be the club’s return on investment (ROI)?

14. Commercial Services.com Corporation provides business to-business services on the Internet. Data
concerning the Internet. Data concerning the most recent year appear below:
Sales................................................... Tk. 30,00,000
Net operating income ............................ Tk.1,50,000
Average operating assets .................... Tk. 7,50,000
Required: Consider each question below independently. Carry out all computations to two decimal
places.
1. Compute the company’s return on investment (ROI)
2. The entrepreneur who founded the company is convinced that sales will increase next year by
50% and that net operating income will increase by 200% with no increase in average operating
assets. What would be the company’s ROI?
3. The Chief financial officer of the company believes a more realistic scenario would be a Tk.
10,00,000 increase in sales, requiring a Tk. 2,50,000 increase in a average assets, with a resulting
Tk. 2,00,000 increase in net operating income. What would be the company’s ROI in this
scenario?
15. A family friend has asked your help in analyzing the operations of three anonymous companies
operating in the service sector industry. Supply the missing data in the tables below.
Division
A B C
Sales Tk. 90,00,00 Tk. 70,00,000 Tk. 45,00,000
Net operating income Tk. ? Tk. 2,80,000 Tk. ?
Average operating assets Tk. 30,00,000 Tk. ? Tk. 18,00,000
Return on investment(ROI) Tk. 18% 14% ?
Minimum required rate of return:
Percentage 16% ? 15%
Taka amount Tk. ? Tk. 3,20,000 Tk. ?
16. Comparative
Residual incomedata on three companies in the sameTk. ? services industry
Tk. ? are given below:
Tk. 90,000
Company
A B C
Sales Tk. 6,00,000 Tk. 5,00,00 Tk. ?
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Turnover ? ? 2
ROI ? 7% ?
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Required: Fill in the missing above, and comment on the relative performance of the three companies
in as detail as the data permit.

17. “I know headquarters wants us to add that new product line,” said Dell Havasi, manager of Billings
Company’s Office Products Division. “But I want to see the members before I make any move. Our
division’s return on investment (ROI) has led the company for three years, and I don’t want any
letdown.”
Billing Company is a decentralized wholesaler with five autonomous divisions. The divisions are
evaluated on the basis of ROI, with year-end bonuses given the divisional managers who have the
highest ROIs. Operating results for the company’s Office Products Division for the most recent year are
given below:
Sales……………………………………….. Tk.1,00,00,000
Variable expenses ………………………. 60,00,000
Contribution margin…………………….
Fixed expenses ………………………….. 40,00,0000
Net operating income ………………….. 32,00,000
Divisional operating assets …………… Tk.8,00,000
Tk. 40,00,000
The company had an overall return on investment (ROI) of 15% last year (considering all divisions).
The office Products Division has an opportunity to add a new product line that would require and
additional investment in operating assets of Tk. 10,00,000. The cost and revenue characteristics of the
new product line per year would be :
Sales ………………………………………… Tk. 20,00,000
Variable ………………………………………. 60% of sales
Fixed expenses ………………………………. Tk.6,40,000
Required:
1. Compute the office Products Division’s ROI for the most recent year; also compute the ROI as it
would appear if the new product line is added.
2. If you were in Dell Havasi’s position, would you accept or reject the new product line?
Explain.
3. Why do you suppose headquarters in anxious for the Office Products Division to add the new
product line?
4. Suppose that the company’s minimum required rate of return on operating assets is 12%
and that performance is evaluated using residual income.
(a). Compute the Office Products Division’s residual income for the most recent year; also
compute the residual income as it would appear if the new product line is added.
(b). Under these circumstance, if you were in Dell Havasi’s Position, would you accept or reject
the new product line? Explain.
Segmented Income Statement
18. Rowshan Traders has two segment A and B. The following information are available.
Accounts Title Taka
Sales:
Dept-A 3,50,000
Dept-B 2,50,000
Variable cost:

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Materials 1,50,000
Dept-A 1,27,000
Dept-B
Wages: 43,000
Dept-A 35,000
Dept-B
Other variable Factory overhead 6,000
Dept-A 4,000
Dept-B
Traceable Fixed Cost: 32,000
Showroom wages 46,000
Salaries 30,000
Rent of Showroom 44,000
Advertising 40,000
Equipment deprecation
Common Fixed Cost: 15,000
General Manager Salary 6,000
Local Authority Tax
Traceable Fixed Cost are apportion into two segments are 60% & 40% respectively.
Required: Prepare a contribution format income statement segmented by the Department.
19. Raner, Harris, & Chan is a consulting firm that specializes in information systems for medical and dental
clinics. The firm has two offices-one in Chicago and one in Minneapolis. The firm classifies the direct
cost of consulting jobs as variable cost. A contribution format segmented income statement for the
company’s most recent year is given below:
Office
Total Company Chicago Minneapolis
Sales Tk. 4,50,000 100% Tk. 1,50,000 100% Tk. 3,00,000 100%
Variable expenses 2,25,000 50% 45,000 30% 1,80,000 60%
Contribution margin 2,25,000 50% 1,05,000 70% 12,000 40%
Traceable fixed expenses 1,26,000 28% 78,000 52% 48,000 16%
Office segment margin 99,000 22% Tk. 27,000 18% Tk. 72,000 24%
Common fixed expenses
not traceable to offices 63,000 14%
Net operating Income Tk. 36,000 8%
Required:
1. By how much would the company’s net operating income increase if Minneapolis increased its
Sales by Tk. 75,000 per year? Assume no change in cost behavior patterns.
2. Refer to the original data. Assume that sales in Chicago increase by Tk. 50,000 next year and
that sales in Minneapolis remain unchanged. Assume no change in fixed costs.
(a) Prepare a new segmented income statement for the company using the above format.
Show both amounts and percentages.
(b) Observe from the statement you have prepared that the contribution margin ration for
Chicago has remained unchanged at 70%(the same as in the above data) but that the
segment margin ratio has changed. How do you explain the change in the segment
margin ratio?

20. Companhia Bardesco, S.A., of Brazil, an industrial supply store chain, has two divisions. The
Company’s Contribution format income statement segmented by divisions for last year is given below:

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Top management Total Division doesn’t
Company Plastics Glass only
Sales Tk. 15,00,000 Tk. 9,00,000 Tk. 6,00,000 one-
Variable expenses 7,00,000 4,00,000 3,00,000 third
Contribution margin 8,00,000 25,000 3,00,000 less
Traceable fixed expenses: than
Advertising 3,00,000 1,80,000 1,20,000 sales
Depreciation 1,40,000 92,000 48,000 in the
Administration 2,20,000 1,18,000 1,02,000
Total 6,60,000 3,90,000 2,70,000
Divisional segment margin 1,40,000 Tk. 1,10,000 Tk. 30,000
Common fixed expenses 1,00,000
Net operating income Tk. 40,000
Plastic Division. Accordingly, management has directed that the Glass Division be further segmented
into product lines. The following information is available on the product lines in the Glass Division:
Glass Division Product Lines
Flat Glass Auto Glass Specialty Glass
Sales Tk. 2,00,000 Tk. 3,00,000 Tk. 1,00,000
Traceable fixed expenses:
Advertising Tk. 30,000 Tk. 42,000 Tk. 48,000
Depreciation Tk. 10,000 Tk. 24,000 Tk. 14,000
Administration Tk. 14,000 Tk. 21,000 Tk. 7,000
Variable expenses as a percentage of Sales 65% 40% 50%
Analysis shows that Tk. 60,000 of the Glass Division’s administration expenses are common to the
product lines.
Required:
1. Prepare a contribution format segmented income statement for the Glass Division with segments defined
as product lines.
2. Management in surprised by Specialty Glass’s poor showing and would like to have the product line
segmented by market. The following information is available about the two markets in which Specialty
Glass is sold:
Specialty Glass Markets
Domestic Foreign
Sales Tk. 60,000 Tk. 40,000
Traceable fixed expenses:
Advertising Tk. 18,000 Tk. 30,000
Variable expenses as a percentage of Sales 50% 50%
All of Specialty Glass’s depreciation and administration expenses are common to the markets in which
the product is sold. Prepare a contribution format segmented income statement for Specialty Glass with
segments defined as markets.
3. Refer to the statement prepared in(1) above. The sales manager wants to run a special promotional
campaign on one of the products over the next month. A market study indicates that such a campaign
would increase sales of Flat Glass by Tk. 40,000 or sales of Auto Glass by Tk. 30,000. The campaign
would cost Tk. 8,000. Show computations to determine which product line should be chosen.

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21. Diversified Products, Inc, has recently acquired a small publishing company that Diversified Products
intends to operate as one of its investment centers. The newly acquired company has three books that it
offers for sale- a cookbook, a travel guide, and a handy speller. Each book sells for Tk. 10. The
publishing company’s most recent monthly income statement is given below:
Total Division
Company Cookbook Travel Handy
Guide Speller
Sales Tk. 15,00,000 Tk. 90,000 Tk. 1,50,000 Tk. 60,000
Expenses:
Printing costs 1,02,000 27,000 63,000 12,000
Advertising 36,000 13,500 19,500 3,000
General sales 18,000 5,400 9,000 36,00
Salaries 33,000 18,000 9,000 6,000
Equipment depreciation 9,000 3,000 3,000 3,000
Sales commissions 30,000 9,000 15,000 6,000
General administration 42,000 14,000 14,000 14,000
The followingrent
Warehouse additional information is available
12,000 about the company:
3,600 6,000 2,400
a.Depreciation-office facilities 3,000 1,000 1,000 1,000
Total expenses 2,85,000 94,500 1,39,500 51,000
Net operating income (loss) Tk. 15,000 Tk. (4,500) Tk. 10,500 Tk. 9,000 Only
printing costs and sales commissions are variable; all other costs are fixed. The printing costs
(which include materials, labor, and variable overhead) are traceable to the three product
lines as shown in the statement above. Sales commissions are 10% of sales for any product.
b. The same equipment is used to produce all three books, so the equipment depreciation cost has
been allocated equally among the three product lines. An analysis of the company’s activities
indicates that the equipment is used 30% of the time to produce cookbooks, 50% of the time to
produce travel guides, and 20% of the time to produce handy spellers.
c. The warehouse is used to store finished units of product, so that rental cost has been allocated to
the product lines on the sales dollars. The warehouse rental cost is Tk. 3 per square foot per year.
the warehouse contains 48,000 square feet of space, of which 7,200 square feet is used by the
cookbook line, 24,000 square feet by the travel guide line, and 16,800 square feet by the handy
speller line.

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d. The general sales cost above includes the salary of the sales manager and other sales costs not
traceable to any specific product line. This cost has been allocated to the product lines on
the basis of sales dollars.
e. The general administration cost and depreciation of office facilities both relate to administration
of the company as a whole. These cost have been allocated equally to the three product lines.
f. All other cost are traceable to the three product lines in the amounts shown on the statement
above. The management of Diversified Products. Inc, is anxious to improve the new investment
center’s 5% returns on sales.
Required:
1. Prepare a new contribution format segmented income statement for the month. Adjust
allocations of equipment depreciation and of warehouse rent as indicated by the
additional information provided.
2. After seeing the income statement in the main body of the problem, management has decided to
eliminate the cookbook because it is not returning a profit, and to focus all available resources on
promoting the travel guide.
a. Based on the statement you have prepared, do you agree with the decision to
eliminate the cookbook? Explain.
b. Based on the statement you have prepared, do you agree with the decision to focus all
available resources on promoting the travel guide? Assume that and ample market
is available for all three product lines.

University Question
1. Alyeska Services Company, a division of a major oil company, provides various services to the operators
of the North Slope oil filed in Alska. Data concerning the most recent year appear below: [NU-2011]
Sale........................................................Tk. 75,00,000
Net operation income............................Tk. 6,00,000
Average operation assets......................Tk. 50,00,000
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.

2. The following data are related to Rupsha Ltd. in 2012: [NU-2012]

Taka
Average operating assets 1,50,00,000
Sales during the year 2,00,00,000
Net operating income 12,00,000
Required: Compute Margin, Turnover of Assets and ROI.

3. Navana Trading Company carries on business in three departments. The following information is available
from their books of accounts as at 31, December, 2014: [NU-2015]
Dept.-1 Dept.-2 Dept.-3
(Tk.) (Tk.) (Tk.)

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Sales 30,750 36,750 16,875

Variable expenses 18,900 18,900 11,250

Rent Tk. 9,840; Insurance Tk. 3,120; Taxes Tk. 1,536 (on sales); and commission expenses Tk. 848. The
traceable income are to be apportioned among the departments in the ration of 2:1:1 respectively. Salaries
and wages amounting to Tk. 5,400 are to be allocated on the basis of sales. Common fixed cost are Tk.
5,000. Draw up in contribution format income statement segmented by the Department.

4. SK Company products and sells two packaged products, ‘S’ and ‘K’ Revenue and cost information relating
to the products follow:- [NU-2015]
Particulars Products
S (Tk.) K (Tk.)
Selling price per unit 5.00 7.50
Variable expenses per unit 2.40 5.25
Traceable fixed expenses per year 45,000 20,000
Common fixed expenses in the company total Tk. 35,000 annually. Last year the company produced and
sold 20,000 units of ‘S’ and 30,000 units of ‘K’.
Required: Prepare a contribution format income statement.

5. Wingate Company, a wholesale distributor of videotapes, has been experiencing losses for some time, as
shown by its most recent contribution format income statement, which follow: [NU-2015]
Sales.........................................................Tk. 10,00,000
Variable expense ……........................... 3,90,000
Contribution margin ……......................... 6,10,000
Fixed expenses …………………………… 6,25,000
Net operating income (loss) …………… Tk.(15,000)
In an effort to isolate the problem, the president has asked for an income statement segmented by
division Accordingly, the Accounting Department has following information:
Required: Division
East Central West
Sales Tk. 2,50,000 Tk. 4,00,00 Tk. 3,50,000
Variable expenses as percentage of sales 52% 30% 40%
Traceable fixed expenses Tk. 1,60,000 Tk. 2,00,000 Tk. 1,45,000
1. Prepare a contribution format income statement segmented by divisions, as desired by the
president.
2. As a result of a marketing study, the president believes that sales in the West Division could be
increased by 20% if monthly advertising in that division were increased by Tk.15,000. Would
you recommend advertising? Show computations to support your answer.

6. The following data are related to Jamuna Ltd. in 2014: [NU-2016,14,12]

Taka
Average operating assets 15,00,000
Sales during the year 20,00,000
Net operating income 1,20,000
Required: Compute Margin, Turnover of Assets and ROI.

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7. Financial data for Beximco Ltd. are given below: [NU-2016]

Beginning Balance Ending Balance
Particulars
(Tk.) (Tk.)
Assets:
Cash 70,000 60,000
Account receivable 2,25,00 2,60,000
Inventory 1,60,000 1,90,000
Plant assets 3,40,000 3,10,000
Investment in Jumuna 1,25,000 1,40,000
Land (undeveloped) 90,000 90,000
Total Assets 10,10,000 10,50,000
Liabilities and owner's equity:
Accounts payable 1,80,000 1,55,000
Long term liability 7,50,000 7,50,000
Owner's equity 80,000 1,45,000
Total liability and owner's equity 10,10,000 10,50,000
Income statement:
Sales 20,25,000
Less: Operating expense 18,22,500
Net operating income 2,02,500
Interest and taxes:
Interest expense 77,500
Tax expense 55,000 1,32,500
Net income 70,000
The company paid dividends of Tk. 5,000 last year.
Required:
(a) Compute the company's margin turnover and return on investment (ROI) for last year.
(b) The boards of directors of the company has set a minimum required rate of return of 15%.
What was the company's residual income for last year?

8. Commercial Services Corporation provides business to business services on the interest. Data concerning
the most recent year appear below: [NU-2017]
Sales Tk. 30,00,000
Net operating income Tk. 1,50,000
Average operating assets Tk. 7,50,000
Required:
Consider each question below independently. Carryout all computations to decimal places,
(a) Compute the company's return on investment (ROI).
(b) The entrepreneur who founded the company is convinced that sales will increase next year by 50%
and that net operating income will increase by 200%, with no increase in average operating assets.
What would be the company's ROI?
(c) The chief financial officer of the company believes a more realistic scenario would be a Taka

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10,00,000 increase in sales, requiring a Taka 2,50,000 increase in average operating assets with a
resulting Taka 2,00,000 increase in net operating income. What would be the company's ROI in this
scenario?

9. Retail division of Pioneer Inc. has reported the following results for last year's operations: [NU-2017]
Sales Tk. 2,50,00,000
Net operating income Tk. 30,00,000
Average operating assets Tk. 1,00,00,000
Required:
(i) Compute the margin, turnover and ROI for the Retail Division.
(ii) Top management of Pioneer Inc. has set a minimum required rate of return on average operating
assets of 25%. What is the Retail Divisions residual incomer for the year?

10. Selected sales and operating data for three divisions are given as follows: [NU-2019,16,,13]
Division A Division B Division C
Sales Tk. 12,000 Tk. 14,000 Tk. 25,000
Average operating assets Tk. 3,000 Tk. 7,000 Tk. 5,000
Net operating assets Tk. 600 Tk. 560 Tk. 800
Minimum required rate of return 14% 10% 16%
Required:
1. Compute the ROI for each division using margin and turnover.
2. Compute the residual income for each division.
3. Assume that each division is presented with an investment opportunity that would yield a 15% rate of
return, which division or divisions will probably accept the opportunity? Reject? Why?

11. Singer Company produces blenders and coffeemakers. During the past year, the company produced and
sold 1,00,000 blenders and 25,000 coffeemakers. Fixed cost for Singer totaled Tk. 2,50,000 of which Tk.
90,000 can be avoided if the blenders are not produced and Tk. 45,000 can be avoided if the coffeemakers
are not produced. Revenue and variable cost information is as follows: [NU-2019]
Details Blenders Coffeemakers
Selling price per unit Tk. 25 Tk. 50
Variable expense per unit Tk. 20 Tk. 45
Required:
(i) Prepare product line income statements segregate direct and common fixed costs;
(ii) What would be the effect on firm’s profit
a. If the coffeemaker line is dropped?
b. If the blender line is dropped?
(iii) What would be the effect on firm’s profit if additional 10,000 blenders could be produces (using
existing capacity) and sold for Tk. 22.00 on a special order basis assuming that existing sales would
be unaffected by special order?

12. You are given the following data: [NU-2020]

Sales Tk. 1,40,000

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Invested capital Tk. 50,000
ROI 10%
Compute the followings:
(a) Turnover of capital
(b) Net operating income
(c) Return on sales

13. BSWP/Purabchal Ltd. has two regional divisions with headquarters in Dhaka and Khulna. Selected data on
the two divisions follow: [NU-2020,17,12]
Division
Dhaka Khulna
Sales 30,00,000 90,00,000
Net operating income 2,10,000 7,20,000
Average operating assets 10,00,000 40,00,000
Required:
(a) Return on investment (ROI) for two division using margin & turnover.
(b) Residual income for two division taking normal rate of return of 15%.
(c) Give you evaluation on the performance of two divisions.

14. Raha Company is involved in four separate industries. The following information is available for each of
the industries: [NU-2021]
Operating Segment Total Revenue Operating Profit (loss) Identifiable Assets
(Tk.) (Tk.) (Tk.)
W 60,000 15,000 1,67,000
X 10,000 3,000 83,000
Y 23,000 (2,000) 21,000
Z 9,000 1,000 19,000
1,02,000 17,000 2,90,000
Required:
Determine which of the operating segments are reportable based on the:
(a) Revenue Test.
(b) Operating Profit (Loss) Test.
(c) Identifiable Assets Test.

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