Compute the rate of return on investment for each division. b. Which division is the most profitable per dollar invested? Assume that management has established a 10% minimum acceptable rate of return for invested assets. c. Determine the residual income for each division. d. Which division has the most residual income?
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a. Compute the rate of
b. Which division is the most profitable per dollar invested?
Assume that management has established a 10% minimum acceptable rate of return for invested assets.
c. Determine the residual income for each division.
d. Which division has the most residual income?
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- 3. If management desires a minimum acceptable return on investment of 10%, determine the residual income for each division.a. Compute ROI for Division B.b. Compute residual income for Division A.c. Division B could increase its profit by $80,000 by increasing its investment by $300,000. Computeits total residual income. d. Division A could increase its return on sales by one percentage point, while keeping the same totalsales. Compute its ROI.e. Division A could increase its sales so that its asset turnover increased by one time, while holdingtotal assets constant. Compute its ROI.Syarikat Aman Sdn Bhd (SASB) manufactures leather products for the local market. At the beginning of the year 2018, SASB estimates the following costs: Manufacturing overhead costs$ 498,750 Direct labor cost $ 600,000 The following are information related to the production in 2018: Direct labor $ 640,000 Depreciation $ 120,000 Property tax $ 6,000 Supervisor salary $ 100,000 Utilities $ 29,500 Insurance $ 15,000 Rental of space $ 150,000 Indirect labor $ 41,000 Indirect material : Inventory at January 2017 $ 24,000 Purchase during the year $ 47,000 Inventory at December 2017 $ 31,500 T he price per unit for direct material is estimated at $ 5 per unit and direct labor rate per unit is $ 16 per hour. The accountant informed that this amount is similar for both budgeted and actual costs. REQUIRED: (a) Calculate the pre-determined overhead rate for SASB using direct labor hour as a basis. (b) Calculate the under-applied or over-applied overhead. (c) Prepare a journal entry to close the…
- The operating income and the amount of invested assets in each division of Conley Industries are as follows: Operating income Invested Assets Retail Division $103,400 $470,000 Commercial Division 105,000 420,000 Internet Division 130,000 500,000 Assume that management has established a 10% minimum acceptable return for invested assets. a. Determine the residual income for each division. Retail Division Commercial Division Internet Division Operating income $103,400 $105,000 $130,000 Minimum acceptable operating income as a percent of invested assets Residual income $ $ $ b. Which division has the most residual income?Return on Investment; Present Value Depreciation; Spreadsheet Application As indicatedin the chapter, there are goal congruence problems associated with the use of ROI as an indicator ofbusiness unit financial performance. One such problem relates to the bias against accepting new investments because of the adverse effect on a business unit’s ROI metric. Assume, for example, that themanager of a business unit can invest in a new, depreciable asset costing $75,000 and that this asset hasa 3-year life with no salvage value. Cash inflows associated with this investment are projected to beas follows: $30,000, $35,000, and $43,200. (Ignore taxes.) This scenario leads to an estimated internalrate of return (IRR) of 19.44%. Assume that the minimum required rate of return is 15%.Required1. Demonstrate, using the IRR function in Excel, that the IRR on this proposed investment is indeed19.44%.2. Calculate the year-by-year return on investment (ROI) on this proposed investment. For this…Please do not give solution in image format ? And Fast Answering Please ? And Explain Proper Step by Step.
- Bersatu Berhad splits into two divisions, A and B, each with their own cost and revenue streams. Each of the divisions is managed by a divisional manager who has the power to make all investment decisions within the division. The cost of capital for both divisions is 12%. Historically, investment decisions have been made by calculating the return on investment (ROI) of any opportunities and at present.A new manager who has recently been appointed in division A has argued that using residual income (RI) to make investment decisions would result in ‘better goal congruence’ throughout the company. Each division is currently considering the following separate investments: Project for Division A Project for Division B Capital requirement for investment RM 82.8 million RM40.6 million Sales generated by investment Rm44.6 million Rm21.8 million Net profit margin 28% 33% The company is seeking to maximise shareholder wealth. Required: Calculate both the return on investment and…Which statement is true regarding divisional performance? O If a division's return on investment is less than its margin, then the division's sales are greater than its average operating assets. A reduction in selling and administrative expenses increases a division's margin but does not increase its return on investment if the division's turnover is less than one. O If a division's return on investment is greater than its margin, then the division's sales are less than its average operating assets. O An increase in labor costs will reduce a division's margin and its return on investment even if the division's vision turnover is less than one. None of the above statements is true.3 Investment center analysis; ROI and residual income Romano Corporation has three operating divisions and requires a 12% return on all investments. Selected information is presented here: Division X Division Y Division Z Revenues $1,000,000 Operating income. Operating assets... Margin.... $ 120,000 $ 500,000 $100,000 $300,000 12% Turnover .. 1 turn 2 turns ROI..... Residual income . $25,000
- Return on investment The operating income and the amount of invested assets in each division of Conley Industries are as follows: Operating Income Invested Assets Retail Division $72,600 $330,000 Commercial Division 117,600 490,000 Internet Division 224,100 830,000 a. Compute the return on investment for each division. (Round to the nearest whole percentage.) Division Percent Retail Division % Commercial Division % Internet Division b. Which division is the most profitable per dollar invested?Exercise 10-12 Evaluating New Investments Using Return on Investment (ROI) and Residual Income (LO10-1, LO10-2] Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A $ 6,300,000 $ 1,260,000 340,200 Division B $ 10,300,000 $ 5,150,000 968,200 18.80% Division C $ 9,400,000 $ 1,880,000 24 Sales Average operating assets Net operating income Minimum required rate of return 2$ 249,100 20.00% 17.00% Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 20% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept or…Meiji Isetan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Sales Net operating income Average operating assets Required 1 Required 2 Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16%. Compute the residual income for each division. 3. Is Yokohama's greater amount of residual income an indication that it is better managed? Osaka $ 10,600,000 $ 742,000 $ 2,650,000 Complete this question by entering your answers in the tabs below. ROI % Division Required 3 For each division, compute the return on investment (ROI) in terms of margin and turnover. Osaka Yokohama Yokohama $ 36,000,000 $ 3,240,000 $ 18,000,000 %