As the operations manager for Valley Kayaks (as described in the previous problem), you find yourself faced with an interesting situation. Marketing has informed you that they have lost a number of sales because of a lack of inventory. Kayaks, being seasonal in nature, have to be in stock at your dealers if they are to be sold (customers are not willing to wait). The director of marketing propose that you increase inventories by 20 percent (a major investment to you). She has also given the information in the following table. Use Figure 2.3. Category Sales Cost of goods sold Variable expenses Fixed expenses Inventory Accounts receivable Other current assets Fixed assets Current Values $ 5,390,000 $ 3,850,000 $ 770,000 269,500 $ $ 315,000 $ 350,000 741,000 $ $ 444,000 Proposed Impact of Inventory Increase 20% + (improvement) 0% 20% - reduction 10% + (increase) 20% + 0% 0% 0% a.Using the information given, complete the following table and calculate the ROA for current values and new values. (Round "ROA" to 2 decimal places.)
As the operations manager for Valley Kayaks (as described in the previous problem), you find yourself faced with an interesting situation. Marketing has informed you that they have lost a number of sales because of a lack of inventory. Kayaks, being seasonal in nature, have to be in stock at your dealers if they are to be sold (customers are not willing to wait). The director of marketing propose that you increase inventories by 20 percent (a major investment to you). She has also given the information in the following table. Use Figure 2.3. Category Sales Cost of goods sold Variable expenses Fixed expenses Inventory Accounts receivable Other current assets Fixed assets Current Values $ 5,390,000 $ 3,850,000 $ 770,000 269,500 $ $ 315,000 $ 350,000 741,000 $ $ 444,000 Proposed Impact of Inventory Increase 20% + (improvement) 0% 20% - reduction 10% + (increase) 20% + 0% 0% 0% a.Using the information given, complete the following table and calculate the ROA for current values and new values. (Round "ROA" to 2 decimal places.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![53
Category
Sales
Cost of goods sold
As the operations manager for Valley Kayaks (as described in the previous problem), you find yourself faced with an interesting
situation. Marketing has informed you that they have lost a number of sales because of a lack of inventory. Kayaks, being seasonal in
nature, have to be in stock at your dealers if they are to be sold (customers are not willing to wait). The director of marketing proposes
that you increase inventories by 20 percent (a major investment to you). She has also given the information in the following table. Use
Figure 2.3.
Variable expenses
Fixed expenses
Inventory
Accounts receivable
Other current assets
Fixed assets
Category
Sales
Cost of goods sold
Variable expenses
Fixed expenses
Inventory
Current Values
$ 5,390,000
$ 3,850,000
770,000
269,500
315,000
350,000
741,000
444,000
$
$
Current Values
$ 5,390,000
S 3.850,000
770.000
$
269,500
315.000
$
Proposed Impact of Inventory
Increase
20% + (improvement)
0%
a.Using the information given, complete the following table and calculate the ROA for current values and new values (Round "ROA" to
2 decimal places.)
20% reduction
10%
(increase)
20% +
New Values
0%
0%
0%
Help
4
Save & Exit](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff1aba5b6-40da-4125-8216-36d55e09c453%2Fb4b902f1-fe35-4ed0-a67b-7d062dc2ecb3%2Fmi0clo_processed.jpeg&w=3840&q=75)
Transcribed Image Text:53
Category
Sales
Cost of goods sold
As the operations manager for Valley Kayaks (as described in the previous problem), you find yourself faced with an interesting
situation. Marketing has informed you that they have lost a number of sales because of a lack of inventory. Kayaks, being seasonal in
nature, have to be in stock at your dealers if they are to be sold (customers are not willing to wait). The director of marketing proposes
that you increase inventories by 20 percent (a major investment to you). She has also given the information in the following table. Use
Figure 2.3.
Variable expenses
Fixed expenses
Inventory
Accounts receivable
Other current assets
Fixed assets
Category
Sales
Cost of goods sold
Variable expenses
Fixed expenses
Inventory
Current Values
$ 5,390,000
$ 3,850,000
770,000
269,500
315,000
350,000
741,000
444,000
$
$
Current Values
$ 5,390,000
S 3.850,000
770.000
$
269,500
315.000
$
Proposed Impact of Inventory
Increase
20% + (improvement)
0%
a.Using the information given, complete the following table and calculate the ROA for current values and new values (Round "ROA" to
2 decimal places.)
20% reduction
10%
(increase)
20% +
New Values
0%
0%
0%
Help
4
Save & Exit
![5:47
2 decimal places.)
Category
Sales
Cost of goods sold
Variable expenses
Fixed expenses
Inventory
Accounts receivable
Other current assets
Fixed assets
ROA
Current Values
5,390,000
3,850,000
770,000
269,500
315,000
350.000
741,000
444,000
O Yes
O No
$
$
$
$
$
$
$
$
%
New Values
Saved
b. Would the projected change in ROA justify the inventory investment?
A
Help
ware...
Save &](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff1aba5b6-40da-4125-8216-36d55e09c453%2Fb4b902f1-fe35-4ed0-a67b-7d062dc2ecb3%2Fqud7qyi_processed.jpeg&w=3840&q=75)
Transcribed Image Text:5:47
2 decimal places.)
Category
Sales
Cost of goods sold
Variable expenses
Fixed expenses
Inventory
Accounts receivable
Other current assets
Fixed assets
ROA
Current Values
5,390,000
3,850,000
770,000
269,500
315,000
350.000
741,000
444,000
O Yes
O No
$
$
$
$
$
$
$
$
%
New Values
Saved
b. Would the projected change in ROA justify the inventory investment?
A
Help
ware...
Save &
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![Horngren's Cost Accounting: A Managerial Emphasis…](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
![Financial and Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education