You Are the Management Accountant for the West Coast Division

question 24

Essay

You are the management accountant for the West coast division of a musical instrument manufacturing company.There are three manufacturing plants in your division.Each plant manager was given decision making authority in terms of production, as long as income for their plant kept on pace.The manager at Plant A has consistently been the leader in profit for the division, but the other two managers are complaining that Plant A doesn't seem to be selling any more product than they are.The division manager has noticed higher inventory levels at Plant A, which the plant manager justifies by saying the higher levels are needed to ensure adequate sales.The division manager suspects that there could be other reasons, and she has asked you to provide three proposals for revising performance evaluation.

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Definitions:

Payback Period

The duration required for an investment to produce a sum of income or cash that matches the investment's initial cost.

Useful Life

The estimated time period that an asset is expected to be usable for its intended purpose.

Simple Rate Of Return

A calculation used to evaluate the profitability of an investment, determined by dividing the annual incremental net operating income by the initial investment cost.

Salvage Value

The expected residual worth of an asset upon the conclusion of its effective lifespan.