Chapter 11

Question 1

Segment reporting income statment

Answer 1

Sales
vc
=CM
Less traceable fixed cost
=segment Margin

End of per division column

Less common fixed cost (only in total column)

NOI

Question 2

Maximum transfer price

Answer 2

Cost of buying from outside supplier

Question 3

Minimum transfer price

Answer 3

Variable cost per unit + (total contribution margin on lost sales/ number of units transferred)

Question 4

Gain from transfer

Answer 4

Max-min * units transferred

Question 5

ROI

Answer 5

Operating income/ investment base( average operating assets)

Question 6

Margin

Answer 6

Operating income / sales

Question 7

Turnover

Answer 7

Sales / average operating assets

Question 8

ROI

Answer 8

Margin x turnover

Question 9

Residual income

Answer 9

Net operating income - (average operating assets x minimum required rate of return)

Question 10

Profit forgone by department

Answer 10

Selling department
- (internal selling price - minimum transfer cost)
+
Purchasing department
- (out of company purchasing price- internal purchasing price)

x

Units transferred

=