ACT 5140 – Accounting for Decision Makers
HW #6 – Chapter 11
Directions: Answer all four of the questions. Please submit your work in Word or PDF
formats only. You can submit an Excel file to support calculations, but please “cut and
paste” your solutions into the Word or PDF file. Be sure to show how you did your
calculations. Also, please be sure to include your name at the top of the first page of your
file.
Question #1
A business is considering dropping a segment of its business. Describe the issues that the
business should consider in making this decision.
Question #2
a) What is a “transfer price?”
b) List and describe 3 main reasons for using transfer prices. Be specific in your
descriptions.
Question #3
Consider the following information about a potential project:
Investment required
Expected annual project revenue
Expected annual project expenses
Required rate of return
Current division return on investment $15,000,000
$17,000,000
$14,500,000
15%
19% a) Calculate the project’s return on investment.
b) Based solely on ROI, is this project in the firm’s best interests? Why or why not?
c) Is this project in the division manager’s best interests? Why or why not?
d) Perform DuPont Analysis on this project.
e) What is the project’s residual income?
Question #4
Assume the CFO of your organization approaches you to ask your advice about implementing
and using the Balanced Scorecard at your organization.
a) List and describe the four perspectives of the Balanced Scorecard.
b) What steps would you encourage him or her to take in order to successfully implement and
use the Scorecard to manage the organization? As part of your answer, be sure to describe any
roadblocks to be avoided. Be specific in describing the steps and roadblocks.

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