1. Problem 1 – Return on Investment (ROI) The company invested 1000000 and earns annual operating income of 250000. Step 1. Formula for ROI is $$ROI = \frac{\text{Operating Income}}{\text{Investment}} \times 100\%$$ Step 2. Substitute values: $$ROI = \frac{250000}{1000000} \times 100\% = 25\%$$ Step 3. Interpretation: A 25% ROI means the company earns 25 cents for every 1 peso invested annually. This is a good return; management should consider continuing similar investments if this meets or exceeds company targets. 2. Problem 2 – Residual Income (RI) Operating income = 500000, total assets = 2000000, required rate = 10%. Step 1. Calculate required return: $$\text{Required Return} = 2000000 \times 10\% = 200000$$ Step 2. Calculate RI: $$RI = \text{Operating Income} - \text{Required Return} = 500000 - 200000 = 300000$$ Step 3. Interpretation: Division A created 300000 more than the minimum expected return, showing good performance. 3. Problem 3 – KPI Selection Step 1. Suggest KPI 1: Customer Satisfaction Score - tracks service quality and guest happiness. Step 2. Suggest KPI 2: Average Cost per Guest - monitors cost efficiency. Step 3. Suggest KPI 3: Repeat Customer Rate - indicates customer loyalty. Step 4. Explanation: These KPIs directly measure satisfaction and cost management, supporting improvement goals. 4. Problem 4 – Benchmarking Application Step 1. Store turnover = 6, industry average = 8. Step 2. Possible reasons: (a) Overstocking causing slow sales, (b) Inefficient sales or marketing. Step 3. Actions: (a) Optimize inventory levels, (b) Enhance marketing to boost sales, aiming for turnover 8 or higher. 5. Problem 5 – Relevant Costing Decision Special order = 500 units at 250 each, normal price = 300, variable cost = 220, fixed cost unchanged. Step 1. Calculate contribution per unit for special order: $$250 - 220 = 30$$ Step 2. Total contribution from special order: $$30 \times 500 = 15000$$ Step 3. Since fixed costs are unchanged, the 15000 is additional profit. Step 4. Decision: Accepting the special order increases profit by 15000, so it should be accepted.