Reference no: EM13937077
Relevant costs, performance evaluation, goal congruence.
Mikkeli Oy has three operating divisions. The managers of these divisions are evaluated on their divisional operating profit, a figure that includes an allocation of corporate overhead proportional to the revenues of each division. The operating profit statement (in thousands) for the first quarter of 2005 is as follows:
|
Tampere Division
|
Oulu Division
|
Kotka Division
|
Total
|
|
Revenues
|
€2000
|
€1200
|
€1600
|
€4800
|
|
Cost of goods sold
|
1050
|
540
|
640
|
2230
|
|
Gross profit
|
950
|
660
|
960
|
2570
|
|
Division overhead
|
250
|
125
|
160
|
535
|
|
Corporate overhead
|
400
|
240
|
320
|
960
|
|
Divisional operating profit
|
€300
|
€295
|
€480
|
€1075
|
The manager of the Tampere Division is unhappy that his profitability is about the same as the Oulu Division's and is much less than the Kotka Division's, even though his revenues are much higher than either of these other two divisions'. The manager knows that he is carrying one line of products with very low profitability. He was going to replace this line of business as soon as more profitable product opportunities became available, but he has kept it because the line is marginally profitable and uses facilities that would otherwise be idle. That manager now realises, however, that the sales from this product line are attract- ing a fair amount of corporate overhead because of the allocation procedure and maybe the line is already unprofitable for him. This low-margin line of products had the following characteristics for the most recent quarter (in thousands):
Revenues €800
Cost of goods sold 600
Avoidable division overhead 100
Required
1. Prepare the operating profit statement for Mikkeli Oy for the second quarter of 2005. Assume that revenues and operating results are identical to the first quarter except that the manager of the Tampere Division has dropped the low-margin product line from his product group.
2. Is Mikkeli Oy better off from this action?
3. Is the Tampere Division manager better off from this action?
4. Suggest changes for Mikkeli's system of division reporting and evaluation that will motivate division managers to make decisions that are in the best interest of Mikkeli Oy as a whole. Discuss any potential disadvantages of your proposal.
|
What is the output of the following function call after main
: What is the output of the following function call, given the function shown after main?
|
|
Parallel and perpendicular lines coordinate geometry
: Geometry and measurement Just over a quarter of the mathematics questions address the following concepts: Area and perimeter of a polygon Area and circumference of a circle Volume of a box, cube, and cylinder Pythagorean theorem and special prope..
|
|
Definition of health of public health
: What is your personal definition of "health?" Of "public health?" How will your definitions, in your opinion, influence your expectations of those you treat, live with, work with, whether in a hospital/clinic role or in a public health role? 200 wo..
|
|
Outlining the key ideas and the sequence
: First of all, you are to prepare a background paper on your overall topic, briefly outlining the key ideas and the sequence of learning from Foundation Year to Year 7, but focused on ‘locating' your particular sub-topic and learning objectives wit..
|
|
Prepare the operating profit statement for mikkeli oy
: Prepare the operating profit statement for Mikkeli Oy for the second quarter of 2005. Assume that revenues and operating results are identical to the first quarter except.
|
|
How to develop a promotion strategy
: Q1. How to develop a promotion (marketing communication) strategy Q2. What sort of promotional strategy would you develop Both questions with 300-400 words each.
|
|
Describe his major contribution to astronomy
: Prepare a brief biography for a major contributor to the field of astronomy. Describe his major contribution(s) to astronomy.
|
|
Convert infix to postfix expression
: For every postfix expression there exists a corresponding and uniquely defined infix expression that evaluates to the same number.
|
|
What are the pricing objectives and policies
: What are the pricing objectives, policies, strategies and procedures? To what extent are prices set on sound cost, demand and competitive criteria?
|