1.
Support Department Allocations And Cost Drivers
Varney Corporation, a manufacturer of electronics andcommunications systems, allocates Computing and CommunicationsServices Department (CCS) costs to profit centers. The followingtable lists the types of services and cost drivers for eachservice. The table also includes the budgeted cost and quantity foreach service for August.
| CCSServices |
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 theCommunication Systems (COMM) division. Assume the followinginformation for COMM:
- COMM has 2,500 employees, of whom 20% are officeemployees.
- All of the office employees have been issued a smartphone, and95% of them have a computer on the network.
- One hundred percent of the employees with a computer also havean email account.
- The average number of help desk calls for August was 0.6 callper individual with a computer.
- There are 400 additional printers, servers, and peripherals onthe network beyond the personal computers.
a. Compute the service allocation rate for eachof CCS’s services for August.
b. Compute the allocation of CCS’s services toCOMM 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) operatescompany-owned and franchised restaurants in over 100 countries. Thecompany operates primarily as a franchisor with approximately 85%of its current restaurants operated by franchisees. McDonald’s goalis to franchise approximately 95% of its restaurants in the longterm.
McDonald’s operations are divided into the followingsegments:
- 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 containedin the preceding segments plus corporate activities
McDonald’s believes that the High Growth segment has significantpotential 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 thethree segments. Round to one decimal place.
| Profit margin |
| United States | % | |
| International Lead | % | |
| High Growth | % | |
b. Determine the investment turnover for thethree segments. Round to two decimal places.
| Investment
Turnover |
| United States | | |
| International Lead | | |
| High Growth | | |
c. Use the DuPont formula to determine thereturn on investment for the three segments. Round to onedecimal place.
| Return on
Investment |
| United States | % | |
| International Lead | % | |
| High Growth | % | |
*NOTE*: Please show all work for this.
Thanks!
