BUS 630-Week 5 Written Assignment-FedEx
BUS 630-Week 5 Written Assignment-FedEx
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Date Created: 11/13/15
Running head Week 5 Week 5 Written Assignment FedEx Noel Jones BUS 630 Managerial Accounting Karen Smith May 13 2012 Week 5 1 FedEx FedEx s strategy for success in the marketplace is product leadership customer value proposition and is achieved through FedEx s operational excellence This is supported by the statement We intend to continue leverage and extend one of our greatest assets the FedEx brand and to provide our customers with convenient seamless access to our entire portfolio of integrated business solutions For instance through our FedEx One Call program we assign a single customer agent to handle virtually all issues of a customer s account FedEx 10K 2005 p 4 Another important detail We believe that seamless information integration is critical to obtain business synergies from multiple operation units For example our Website fedexcom provides a single point of contact for our customers to access FedEx Express FedEx Ground FedEx Freight shipment tracking customer service and invoicing information and FedEx Kinko s office and print services There are four main business segments and they are as follows FedEx Express FedEx Ground FedEx Freight and FedEx Kinko s Two traceable fixed costs for each of the four business segments are as follows FedEx Freight 1 The salary of the office manager at the administrative office in San Jose California 2 Depreciation on the eet freight vehicles FedEx Express 1 Cost to operate the World Headquarters in Shelby County Tennessee 2 cost to lease the facilities that house FedEx personnel Week 5 3 FedEx Ground 1 Costs to run the information and data centers located in Pittsburgh Pennsylvania 2 The insurance required to run the owneroperated vehicles FedEx Kinko s 1 The Ship Centers manager s salary 2 Depreciation on the copy and print machines 3 An example of a cost center is the 321 service centers of FedEx Freight An example of a profit center is FedEx Kinko s office and print centers An example of an investment center is each of the four subsidiaries FedEx Express FedEx Freight FedEx Ground and FedEx Kinko s 4 The fees associated With the landing of the planes can become common if FedEx chose to break down the fees into overnight deliveries and twoday express deliveries This could also be done for the insurance costs and maintenance of the eet of vehicles that FedEx and its subsidiaries have 5 Margin Turnover and Return On Investment ROI In Millions FedEx FedEx FedEx FedEx Expres s Ground Freight Kinko s Sales 19485 4680 3217 2066 Operating Income 1414 604 354 100 Segment assets 2004 12443 2248 1924 2903 2005 13130 2776 2047 2987 Average Operating 12787 2512 1986 2945 Assets Margin 73 129 11 48 Tumover 153 186 162 070 Week 5 4 ROI 111 245 178 34 200420052 Net Operating Income Sales Sales Average Operating Assets Net Operating Income Average Operating Assets OR Margin X Turnover 6 Residual Income In Millions FedEx FedEx FedEx FedEx Expres s Ground Freight Kinko s Average Operating 12787 2512 1986 2945 assets Net Operating income 1414 6044 354 100 Minimum required 1918 377 298 442 return Residual Income 504 227 Si 1 342 2 loss Average Operating assets 15 th Operating income Minimum required return 7 When figuring the ROI with the investment the calculation would be 20 million 4 million This would equal 5 or 20 Now reviewing the figures from question 6 it would not be recommended for FedEx Ground to accept the investment because the investment ROI of 20 is 4 below the current ROI of 24 Although it would be recommended for FedEx Express because they current ROI is only 111 and would be raised by 89 to reach the investment amount of ROI 20 Week 5 5 In Millions FedEx Express FedEx Ground Operating income from investment 4 4 Required ROI from investment E E Residual income from investment 1 1 Residual income prior to investment m SE Residual income after investment amp SQ 20 million 15 Yes the managers of both segments should pursue the investment opportunity because as shown above the residual income Will raise both segments by 1 million Week 5 6 References Noreen E Brewer P amp Garrison R 2011 Managerial Accounting for managers 2nd ed New York McGrawHill Irwin United States Securities and Exchange Commission 2005 FedEx Corporation Form 0K Retrieved on May 10 2012 from httDwwwsecoovArchivesedoardata1048911000110465905032464a05 11806110khtmltem5MarketForRegistrantsCommonE235807