Consolidated Gas Supply Corporation Uses the Investment Center Concept for the Gasoline

question 50

Essay

Consolidated Gas Supply Corporation uses the investment center concept for the gasoline stations that it manages in the city. Consolidated has a 15% required rate of return on investment in order for a branch station to be viable. Select operating data for three of its stations for 200X are as follows:
Required:
a. Compute the return on investment for each station.
b. Which station manager is doing best based only on ROI? Why?
c. Are any of the stations in danger of being closed due to lack of performance?
d. What other factors should be included when evaluating the managers?

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Definitions:

Indirect Expense

Expenses incurred that are not directly linked to a specific product or service, such as utilities or rent for the business premises.

Service Department Charges

The costs of services provided by an internal service department and transferred to a responsibility center.

Profit Center

A branch or division of a business that is directly responsible for generating its own revenue and profits.

Property Tax Expense

The cost incurred by property owners for taxes assessed on their land and buildings, recognized as an expense for the business.