Conner Manufacturing has two major divisions. Management wants to compare their relative performance. Information related to the two divisions is as follows: Division 1: Sales: Expenses: Asset investment: $200,000 $150,000 $1,000,000 Division 2: Sales: $45,000 Expenses: $35,000 Asset investment: $200,000 Conner currently requires investments to meet a rate of return on asset investment of 5%. Which division has the greatest level of "residual income"? Select one: O O O a. Division 1 b. Division 2 c. Both divisions have the same return on investment ratio

Conner Manufacturing has two major divisions. Management wants to compare their relative performance. Information related to the two divisions is as follows: Division 1: Sales: Expenses: Asset investment: $200,000 $150,000 $1,000,000 Division 2: Sales: $45,000 Expenses: $35,000 Asset investment: $200,000 Conner currently requires investments to meet a rate of return on asset investment of 5%. Which division has the greatest level of "residual income"? Select one: O O O a. Division 1 b. Division 2 c. Both divisions have the same return on investment ratio

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Subject - account Please help me. Thankyou.
am. 103.
None
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?
Use the following information for the Problems below: The following data pertain to three divisions of Nevada Aggregates, Incorporated. The company's required rate of return on invested capital is 8 percent. Division A Division B Division C $ Sales revenue ? ? 12,000,000 $ $ Income Average investment ? 450,000 2,190,000 $ ? ? 2,700,000 Sales margin 40% ? 45% Capital turnover 2 ? ? ROI ? ? 20% $ Residual income ? ? 133,000 PR 13-37 (Algo) ROI and Residual Income; Missing Data (LO 13-2) Required: The following data pertain to three divisions of Nevada Aggregates, Incorporated. The company's required rate of return on invested capital is 6 percent. Note: Round "Capital turnover" answers to 2 decimal places. Division A Division B Division C Sales revenue $ 40,800,000 Income $ 1,710,000 $ 8,160,000 Average investment 10,200,000 Sales margin 18 % 1.00 % 20% Capital turnover ROI Residual income % % 18 % $ 501,000
Selected sales and operating data for three divisions of different structural engineering firms are given below: Division C $ 25,450,000 $ 5,090,000 $636,250 12.50% Sales Average operating assets Net operating income Minimum required rate of return Division A $ 12,360,000 $ 3,090,000 $ 494,400 7.00% Required: 1. Compute each division's margin, turnover, and return on investment (ROI). 2. Compute each division's residual income (loss). 3. Assume each division is presented with an investment opportunity yielding a 8% rate of return. a. If performance is being measured by ROI, which division or divisions will accept the opportunity? b. If performance is being measured by residual income, which division or divisions will accept the opportunity? Division B $ 28,360,000 $ 7,090,000 $ 453,760 7.50% Complete this question by entering your answers in the tabs below. Division A Division B Division C Required 1 Required 2 Required 3A Required 3B Assume each division is presented with an…
Tan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Required 1X Required 2 Sales Net operating income. Average operating assets Required: 1. For each division, compute the return on investment (ROI). 2. Compute the residual income for each division assuming the company's minimum required rate of return is 15%. Complete this question by entering your answers in the tabs below. ROI Osaka $ 10,500,000 $630,000 $ 3,500,000 Osaka Division For each division, compute the return on investment (ROI). % Yokohama $ 35,000,000 $ 2,800,000 $ 17,500,000 Yokohama %
Complete this question by entering your answers in the tabs below. Profit Margin Investment Turnover Compute investment turnover for each center. Which center has the better investment turnover? Investment Turnover Numerator: / Denominator: Investment Center Electronics Sporting Goods Which center has the better investment turnover?
Required information [The following information applies to the questions displayed below.] Megamart provides the following information on its two investment centers. Investment Center Electronics Income $ 3,114,000 2,261,000 Average Assets $ 17,300,000 13,300,000 Sporting goods Sales $ 41,520,000 18,088,000 1. Compute return on investment for each center. Using return on investment, which center is most efficient at using assets to generate income? 2. Assume a target income of 11% of average assets. Compute residual income for each center. Which center generated the most residual income? 3. Assume the Electronics center is presented with a new investment opportunity that will yield a 14% return on investment. Should the new investment opportunity be accepted? The target return is 11%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute return on investment for each center. Using return on investment, which center is most efficient…
What is the investment turnover?
The following information is provided for each division. Investment Center Cameras and camcorders Net Income $6,150,000 2,310,000 1,100,000 Average Assets $23,300,000 16,500,000 11,600,000 Phones and communications Computers and accessories Assume a target income of 14% of average invested assets. Required: Compute residual income for each division. (Enter losses with a minus sign.) Computers and Accessories Cameras and Phones and Target Income Camcorders Communications % % % Targeted return Target income Cameras and Camcorders Phones and Communications Computers and Accessories Residual Income Residual income (loss)