The Manager of the Recently Formed Oak Division of Parkes

question 38

Essay

The manager of the recently formed Oak Division of Parkes, Incorporated, is evaluating the following four investment opportunities available to the division. Parkes, Incorporated, requires a minimum return of 10 per cent. Required:
a.
Calculate the return on investment (ROI) for each investment opportunity.
b.
If only one investment opportunity can be funded and the division is evaluated based on ROI, which investment opportunity would be accepted?
c.
If Parkes, Incorporated, can fund all of the projects and wishes to achieve the best possible performance, which investments would be accepted?

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Definitions:

Activity Cost Pools

A grouping of all costs related to a particular activity, used in activity-based costing to allocate costs more accurately.

Activity Rate

A rate used to allocate costs to cost objects based on the activities that drive costs, often used in activity-based costing.

Batch Setup

Batch setup involves the processes and activities necessary to prepare equipment and facilities for the production of a batch of goods.

Human Resource Management

The strategic approach to the effective management of people in an organization to help the business gain a competitive advantage.