Question

The Johnson transportation Company uses a responsibility report 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 in investment calculations. The allocation of resources within the company and the segment manger's 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 the information below:

  Planes Taxis Limos

_________________________________________________________________________________________________________

Service revenue $ $498,700 $

Variable Costs $5,506,00 $ $296,800

Contribution margin $ $246,000 $471,445

Controllable fixed costs $1,504,700 $ $

Controllable margin $ $79,000 $228,645

Average operating assets $24,987,600 $ $1,524,300

Return on investment 11% 8% ?

Answer 1

Service revenue Variable costs Contribution margin Controllable fixed costs Controllable margin Average operating assets Return on investment Planes taxis limos $498,700 (g) $ 550,600 (d) $ 296,800 (b) $ 246,000 $ 471,445 $ 1,504,700 (e) $ 79,000 $ 228,645 $24,987,600 (f) $1,524,300 11% 8% 0) (h) (c) Planes taxis l imos Service revenue $ 4,803,936 $498,700 $ 768,245 Variable Costs $ 550,600 $252,700 $ 296,800 Contribution margin $ 4,253,336 $246,000 $ 471,445 Controllable fixed costs $ 1,504,700 $167,000 $ 242,800 Controllable margin $ 2,748,636 $ 79,000 $ 228,645 Average operating assets $ 24,987,600 $987,500 $1,524,300 Return on investment 11% 8% 15%

Solution for Planes (c) Return on Investments - Controllable Margin / Average Operating assets. Using the data provided, Controllable Margin i.e, (c) is 24,987,600 x 11% = $ 2,748,636 (b) Contribution Margin = Controllable margin + controllable Fixed Cost So, (b) is 2748636 +1504700 = $ 4,253,336 (a) Sales Revenue - Variable Costs + Controbution Margin So, (a) = 550,600 +4,253,336 = $ Please check varaible cost for planes in your question 4,803,936

Solution for Taxis (f) Average Operating assets = Conrollable Margin/return on Investments = 800,000. ( answer) So, (F)= 79,000/8% = $ 987,500 (e) Controllable Fixed Cost = Contribution Margin - Controllable margin so,(e) = 246,000-79000= $ 167,000 (d) Variable Cost=Sales - Contribution Margin So, (d) =498700 -246,000 = $ 252,700 Solution for Limos 15.00% (1) Return on investments Controllable Margin / Average operating assets so, (i) = 228,645/1524,300= (h) Controllable Fixed Cost = Contribution Margin-Controllable Marginwer) so, (h) -471445-228645= $ (g) Sales revenue = Variable cost + contribution margin so, (g) =471,445+296,800 = $ 242,800 768,245

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