How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Linda_us Your Own Question

Linda_us
Linda_us, Finance, Accounts & Homework Tutor
Category: Homework
Satisfied Customers: 7291
Experience:  Post Graduate Diploma in Management (MBA)
19873544
Type Your Homework Question Here...
Linda_us is online now
A new question is answered every 9 seconds

Return on Investment and Residual Income Portia Carter is

This answer was rated:

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)
THIS ANSWER IS LOCKED!

You need to spend $3 to view this post. Add Funds to your account and buy credits.
Linda_us and other Homework Specialists are ready to help you
Customer: replied 3 years ago.

thanks, XXXXX XXXXX i may have some more questins as i go thought it closely

Thank you. I would be happy to assist you with any follow up questions you have.
Customer: replied 3 years ago.

thank u, response was fast

You are welcome.
Customer: replied 2 years ago.

Hi Linda,


 


By any change I could download the answer to the above question?


Sorry for the inconvenience


 


Regards

Customer: replied 2 years ago.

Dear Linda,


 


I still cannot see or unable to download the file


 


Please resubmit.


 


Thanks

I am currently away from my system, I will post the solution tonight.

click here

Please download it and keep it for your future reference.
Customer: replied 2 years ago.

Excellent response, thanks so much for being helpful