Description of this paper

BU330 Assignment-4 Portia Carter

Description

solution


Question

Question;Return on Investment and Residual Income;Portia Carter is the president of a company that owns six multiplex;movie theaters. Carter has delegated decision-making authority to the;theater managers for all decisions except those relating to capital;expenditures and film selection. The theater managers? compensation;depends on the profitability of their theaters. Max Burgman, the;manager of the Park Theater, had the following master budget and actual;results for the month.;Master Actual;Budget Results;Tickets sold 120,000 480,000;Revenue--tickets $ 840,000 $ 880,000;Revenue--concessions 480,000 330,000;Total revenue $1,320,000 $1,210,000;Controllable variable costs;Concessions 120,000 99,000;Direct labor 420,000 330,000;Variable overhead 540,000 550,000;Contribution margin $ 240,000 $ 231,000;Controllable fixed costs;Rent 55,000 55,000;Other administrative expenses 45,000 50,000;Theater operating income $ 140,000 $ 126,000;1. Assuming that the theaters are profit centers, prepare a performance;report for the Park Theater using the chart below. Include a flexible;budget. Determine the variances between actual results, the flexible;budget, and the master budget. (25 points);Actual Flexible Master;Results Variance Budget Variance Budget;Tickets sold 110,000 () 120,000;Revenue--tickets $ 880,000 () () $ 840,000;Revenue--concessions 330,000 () () 480,000;Total revenue $1,210,000 () $1,320,000;Controllable variable costs;Concessions 99,000 () () 120,000;Direct labor 330,000 () () 420,000;Variable overhead 550,000 () () 540,000;Contribution margin $ 231,000 () () $ 240,000;Controllable fixed costs;Rent 55,000 55,000;Other administrative expenses 50,000 () 45,000;Theater operating income $ 126,000 () () $ 140,000;2. Evaluate Burgman?s performance as a manager. (25 points);3. Assume that the managers are assigned responsibility for capital;expenditures and that the theaters are thus investment centers. Park;Theater is expected to generate a desired ROI of at least 6 percent on;average invested assets of $2,000,000.;a. Compute the theater?s return on investment and residual income using the chart below. (25 points);Actual Flexible Master;ROI ? ? ?;= 0.00% = 0.00% = 0.00%;Residual income ? ( 0% x ) ? ( 0% x ) ? ( 0% x );= = =;b. Using the ROI and residual income, evaluate Burgman?s performance as a manager. (25 points)

 

Paper#40076 | Written in 18-Jul-2015

Price : $22
SiteLock