| Course | ACC-1020 Principles of Managerial Accounting |
|---|---|
| Module | Module 6 |
| Paper type | Homework 6: business performance and capital budgeting |
| Length | About 723 words, 5 pages |
| Format | APA 7 student paper |
| School | Thomas Edison State University |
| Program | Bachelor of Science in Business Administration |
| Updated | October 2026 |
Free sample paper for ACC 1020 Module 6
Pinelands Drum Works, Inc.: Measuring the Custom Division and Deciding on a Second Finishing Booth
Student Name
Bachelor of Science in Business Administration, Thomas Edison State University
ACC-1020: Principles of Managerial Accounting
Mentor Name
Month Day, Year
Pinelands Drum Works, Inc.: Measuring the Custom Division and Deciding on a Second Finishing Booth
This final homework for Pinelands Drum Works, Inc., whose costing, budgeting and decision problems fill the earlier homework samples, looks at the custom kit division from two angles. First, it evaluates the division's performance with return on investment, residual income and a balanced scorecard. Second, it evaluates the investment the division's manager has requested: a second, automated finishing booth that would end the backlog of custom orders the plant now turns away, the same opportunity identified in the make-or-buy analysis in Module 4.
Part A: ROI and Residual Income
The custom division's budgeted 2027 segment margin is $230,000 on average invested assets of $1,200,000, including its share of the plant, shell inventory and finishing equipment. Pinelands requires a minimum return of 12% on capital.
| Measure | Calculation | Result |
|---|---|---|
| Return on investment | $230,000 / $1,200,000 | 19.2% |
| Margin | $230,000 / $1,150,000 sales | 20.0% |
| Turnover | $1,150,000 / $1,200,000 | 0.96 times |
| Residual income | $230,000 minus (12% x $1,200,000) | $86,000 |
ROI of 19.2% comfortably exceeds the 12% hurdle, and breaking it into margin and turnover shows the division earns a strong 20% margin on each sale but turns its assets over slightly less than once a year, mainly because seasoning maple and finished kits awaiting shipment tie up inventory. Residual income of $86,000 measures the dollar profit above the required return. The two measures can point managers in different directions. A manager judged by ROI might reject a project returning 16% because it would pull the division's 19.2% average down, even though 16% exceeds the company's 12% cost of capital; residual income would credit the same project with a positive contribution. For that reason Pinelands evaluates division managers on residual income.
Part B: A Balanced Scorecard for the Custom Division
Financial measures report results after the fact. Kaplan and Norton (1996) argued that financial figures should sit beside forward-looking indicators about customers, the way work is done and the skills of the people doing it. The division's scorecard uses one measure for each perspective.
| Perspective | Measure | 2027 target |
|---|---|---|
| Financial | Residual income | $86,000 |
| Customer | Kits delivered by the promised date | 95% |
| Internal process | Finishes rejected at final inspection | Under 3% |
| Learning and growth | Apprentices certified to finish custom kits | 2 per year |
The measures are linked: certified finishers reduce rejects, fewer rejects make on-time delivery possible, and on-time delivery drives repeat orders and residual income. A scorecard that cannot trace such a chain is just a list of numbers.
Part C: Evaluating the Finishing Booth
The automated booth costs $96,000 installed, will last six years and should sell for $6,000 at the end. The Module 4 estimate of $30,000 a year in extra custom-kit contribution carries over here; the automated sprayers would also cut finishing labor by $6,000 a year, while maintenance would cost $2,000, for $34,000 of annual pretax benefit. With straight-line depreciation of $15,000 a year and a 25% tax rate, taxable income rises by $19,000 and taxes by $4,750, leaving an annual after-tax cash flow of $29,250.
| Method | Calculation | Result |
|---|---|---|
| Payback period | $96,000 / $29,250 | 3.3 years |
| Net present value at 12% | $29,250 x 4.1114 + $6,000 x 0.5066 minus $96,000 | $27,298 |
| Internal rate of return | Rate at which NPV = 0 | About 21.3% |
The booth has a positive net present value of $27,298 at the 12% required return, and its internal rate of return of about 21% exceeds that rate, so it should increase the company's value. Payback of just over three years is well within the booth's six-year life. The methods agree here, but when they conflict, NPV is the most reliable because it measures the dollar value added using the company's cost of capital. Practice broadly follows this guidance: Graham and Harvey (2001) surveyed chief financial officers and found that most always or almost always used NPV and IRR, though many also used payback, especially at smaller firms.
The decision should also be tested. If the added custom orders bring in only $24,000 of contribution instead of $30,000, the after-tax cash flow falls to $24,750 and NPV to about $8,800, still positive. Williams et al. (2023) recommend this kind of sensitivity analysis because the cash flow estimates are the weakest part of any capital budget. The manager's request should be approved, with first-year order volume tracked against the forecast.
References
Graham, J. R., & Harvey, C. R. (2001). The theory and practice of corporate finance: Evidence from the field. Journal of Financial Economics, 60(2-3), 187-243. https://doi.org/10.1016/S0304-405X(01)00044-7
Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard: Translating strategy into action. Harvard Business School Press.
Williams, J. R., Bettner, M. S., & Smith, K. R. (2023). Financial & managerial accounting: The basis for business decisions (20th ed.). McGraw-Hill Education.
What the ACC 1020 Module 6 instructions ask for
The last ACC-1020 homework addresses business performance and capital budgeting. Templates for this module commonly ask you to compute return on investment, often broken into margin and turnover, and residual income for a division, to identify balanced scorecard measures, and to judge a proposed investment by payback, discounted value and the break-even discount rate, sometimes with taxes and depreciation. Use the present value tables or functions the template provides, show annual cash flows before discounting, and explain which method you rely on when results differ. Submit your completed template copy; the final exam follows soon after, so this homework doubles as review. Round present value factors to four decimal places, as the tables do.
How this ACC 1020 Module 6 example is built
The homework treats one division from two angles so the measures connect. Part A computes ROI three ways and residual income, then explains with an example how ROI can discourage good investments. Part B builds a short scorecard with one measure per perspective and explains the cause-and-effect chain linking them. Part C derives the booth's after-tax cash flow step by step, from contribution and savings through depreciation and taxes, presents payback, NPV and IRR in a table, explains why NPV governs when methods disagree, cites survey evidence on practice and runs a sensitivity test on the key assumption before recommending approval. The scorecard targets are numeric so each can be checked at year end.
Reading the ACC 1020 Module 6 grading rubric
Mentors grade this homework on correct computation of ROI, margin, turnover and residual income, sensible scorecard measures, and correct capital budgeting calculations. In capital budgeting they check the annual cash flow, especially the treatment of depreciation and taxes, the discount factors used, the inclusion of salvage value and the interpretation of each method's result. Explanations of why ROI and residual income can lead to different choices, and why NPV is preferred when methods conflict, earn the written-answer points. The sixth homework closes out the 35% homework category, so tidy labels on every figure are worth the extra minute. Partial credit is common when a cash flow error is carried through consistently.
Common ACC 1020 Module 6 mistakes, and how to avoid them
Common Module 6 errors include computing ROI with sales in the denominator, forgetting that depreciation is not a cash flow but reduces taxes, and discounting the salvage value with the annuity factor instead of the single-sum factor. Payback uses undiscounted cash flows. When NPV and IRR are both requested, make sure the IRR you report actually makes NPV zero. Scorecard measures should be specific and measurable, not general goals. Run at least one what-if case if the template invites judgment. Our tutors can complete the ACC 1020 Module 6 template with the division and investment data your mentor assigned. Recompute NPV with your IRR to confirm it lands near zero.
Write yours, or have the desk draft it
This paper is an original model document written by our desk, not a submitted student paper and not an official Thomas Edison State University document. Read it for the moves, then write your own to the instructions in your classroom. If you want one built to your exact prompt and rubric, the first custom sample is free and arrives in 24 to 48 hours.
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ACC 1020 Module 6 questions, answered
Where can I find a free ACC 1020 Module 6 sample paper?
Read the whole Module 6 homework here: ROI and residual income for a division, a four-measure balanced scorecard, and a finishing booth investment evaluated by payback, NPV and IRR, with a sensitivity test and notes.
What is the difference between ROI and residual income?
ROI is a percentage return on invested assets. Residual income is the dollar profit above a minimum required return, which encourages managers to accept any project earning more than the cost of capital.
Why is depreciation included in a capital budgeting analysis if it is not cash?
Depreciation reduces taxable income, so it lowers the cash paid in taxes. That tax saving is a real cash flow.
Which capital budgeting method is most reliable?
NPV, since it tells management in dollars how much a project adds after discounting at the return the owners require.
What are the four perspectives of the balanced scorecard?
Money results, customers, the way work gets done, and people's skills, arranged so that gains in skills and processes feed through to customers and then to profit.