The following information is given 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 uses income to evaluate division managers, compute net income that should be used for that purpose given the limited data above.
b. If Fraternity Corporation uses ROI to evaluate division managers, and uses historical cost as the investment base, compute the ROI for Alpha and Beta.