EXERCISES

13-1,13-2 and 13-6

Isabela P Parungao

EXERCISE 13-1
Royal Lawncare Company produces and sells two packaged
products, Weedban and Greengrow. Revenue and cost
information relating to the products follow:

Common fixed expenses in the company total

$33,000 annually. Last year the company produced
and sold 15,000 units of Weedban and 28,000 units
of Greengrow.

CONTRIBUTION FORMAT INCOME

STATEMENT
EXERCISE 13-1

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*Weedban: 15,000 units $6 per unit = $90,000

Greengrow: 28,000 units $7.50 per unit = $210,000

EXERCISE 13-2
Alyeska Services Company, a division of a major
oil
company, provides various services to the
operators of the North Slope oil field in Alaska.
Data concerning the most recent year appear
below:

EXERCISE 13-6
Meiji Isetan Corp., of Japan, has two regional
divisions with headquarters in Osaka and
Yokohama.

2. Minimum required rate of return is 15%

3. Is Yokohamas greater amount of residual

income an indication that it is better managed?
No, the Yokohama Division is simply larger than
the Osaka Division.
Residual income cant be used to compare the
performance of divisions of different sizes
In this case, the Yokohama Division does not
appear to be as well managed as the Osaka
Division