EXERCISES 13-1,13-2 and 13-6

Isabela P Parungao

EXERCISE 13-1 Royal Lawncare Company produces and sells two packaged

products, Weedban and Greengrow. Revenue and cost information relating to the products follow:

Common fixed expenses in the company total $33,000 annually. Last year the company produced and sold 15,000 units of Weedban and 28,000 units of Greengrow.

PowerPoint chart object

EXERCISE 13-1

CONTRIBUTION FORMAT INCOME STATEMENT

*Weedban: 15,000 units × $6 per unit = $90,000 Greengrow: 28,000 units × $7.50 per unit = $210,000

EXERCISE 13-2

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:

EXERCISE 13-6

Meiji Isetan Corp., of Japan, has two regional divisions with headquarters in Osaka and Yokohama.

2. Minimum required rate of return is 15%

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

• No, the Yokohama Division is simply larger than the Osaka Division.

• Residual income can’t be used to compare the performance of divisions of different sizes

• In this case, the Yokohama Division does not appear to be as well managed as the Osaka Division