Question

In: Accounting

1. Support Department Allocations And Cost Drivers Varney Corporation, a manufacturer of electronics and communications systems,...

1.

Support Department Allocations And Cost Drivers

Varney Corporation, a manufacturer of electronics and communications systems, allocates Computing and Communications Services Department (CCS) costs to profit centers. The following table lists the types of services and cost drivers for each service. The table also includes the budgeted cost and quantity for each service for August.

CCS Services
Cost Drivers
Budgeted Cost		 Budgeted Quantity
of Services
Help desk Number of calls $90,000 3,600
Network center Number of devices 120,000 1,500
Electronic mail Number of user accounts 160,000 5,000
Smartphone support Number of smartphones issued 72,000 4,000

One of the profit centers for Varney Corporation is the Communication Systems (COMM) division. Assume the following information for COMM:

  • COMM has 2,500 employees, of whom 20% are office employees.
  • All of the office employees have been issued a smartphone, and 95% of them have a computer on the network.
  • One hundred percent of the employees with a computer also have an email account.
  • The average number of help desk calls for August was 0.6 call per individual with a computer.
  • There are 400 additional printers, servers, and peripherals on the network beyond the personal computers.

a. Compute the service allocation rate for each of CCS’s services for August.

b. Compute the allocation of CCS’s services to COMM for August.

August charges to the COMM sector
Help desk charge $
Network center charge $
Electronic mail charge $
Smartphone support charge $

2. Analyze McDonald’s Corporation

McDonald’s Corporation (MCD) operates company-owned and franchised restaurants in over 100 countries. The company operates primarily as a franchisor with approximately 85% of its current restaurants operated by franchisees. McDonald’s goal is to franchise approximately 95% of its restaurants in the long term.

McDonald’s operations are divided into the following segments:

  • United States: Restaurants throughout the United States
  • International Lead Markets: Restaurants in Australia, Canada, France, Germany, and the United Kingdom
  • High Growth Markets: Restaurants in China, Italy, Korea, Poland, Russia, Spain, and Switzerland
  • Foundational Markets & Corporate: Restaurants not contained in the preceding segments plus corporate activities

McDonald’s believes that the High Growth segment has significant potential for rapid growth and expansion. Recent data (in millions) for the first three primary segments are as follows:

United States International Lead High Growth
Sales $8,253 $7,223 $6,161
Operating income 3,769 2,838 1,049
Invested assets 11,961 9,113 5,209

a. Determine the profit margin for each of the three segments. Round to one decimal place.

Profit margin
United States %
International Lead %
High Growth %

b. Determine the investment turnover for the three segments. Round to two decimal places.

Investment
Turnover
United States
International Lead
High Growth

c. Use the DuPont formula to determine the return on investment for the three segments. Round to one decimal place.

Return on
Investment
United States %
International Lead %
High Growth %

*NOTE*: Please show all work for this.

Thanks!

Solutions

Expert Solution

1).2).

Hence

1). Total Cost Allocation $99,425/-

2). A) Profit Margin 45.70%,39.30% & 17.0%

B) Investment Turnover 0.69, 0.79 & 1.18

C) Return on Investment 31.50%, 31.10% & 20.00%

ekkarill92 answered 1 year ago
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