E10-8 (Algo) Evaluating Managerial Performance Using Return on Investment, Residual Income [LO 10-4,10-5]Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is available for each division;FruitDivisionFlowerDivisionSales revenueCost of goods sold and operating expensesNet operating income$$ 1,740,000 $ 2,610,0001,392,000348,000 $1,957,500Average invested assets$ 3,480,000 $652,5002,718,750Orange has established a hurdle rate of 6 percent.Required:1-a. Compute each division's return on investment (ROI) and residual income for last year.1-b. Determine which manager seems to be performing better.2. Suppose Orange is investing in new technology that will increase each division's operating income by $131,000. The totalinvestment required is $2,200,000, which will be split evenly between the two divisions. Calculate the ROI and residual income foreach division after the investment is made.3. Determine whether both managers will support the investment.

PART 1Given Information:Fruit Division:Sales Revenue: $1,740,000Cost of Goods Sold and Operating…

Answered: E10-8 (Algo) Evaluating Managerial…

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter14: Decentralized Operations

Section: Chapter Questions

Problem 14.16E

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Division A of Kern Co. has sales of $350,000, cost of goods sold of $200,000, operating expenses of $30,000, and invested assets of $600000. What is the return on investment for Division A? A. 20% B. 25% C. 33% D. 40%
Compute the return on investment for each division
Compute the residual income for each division
42. Operating Profit Margin, Asset Turnover, Return on Investment (ROI), and Residual Income (RI). Financial information for Livingston Tech Support, Inc., for the most recent fiscal year appears as follows. All dollar amounts are in thousands. Livingston Tech Support, Inc. Segmented Income Statements for the Current Fiscal Year (dollar amounts are in thousands) Web Division IT Division Sales $ 7,000 $ 12,000 Cost of goods sold 2,300 2,700 Gross margin $ 4,700 $ 9,300 Allocated overhead (from corporate) 1,200 1,800 Selling and administrative expenses 2,650 3,350 Operating income $ 850 $ 4,150 Income tax expense (30% rate) 255 1,245 Net income $ 595 $ 2,905 42. Operating Profit Margin, Asset Turnover, ROI, and RI (Note: All dollar amounts are in thousands as presented in the textbook.) IT Division Beginning Balance a. Web Division Livingston Tech Support, Inc. Segmented Balance Sheets at End of Most Recent Fiscal Year (dollar amounts are in thousands) Ending Balance Beginning Balance…
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Coolbrook Company has the following information available for the past year: River Stream Division Division Sales revenue $1,200,000 900,000 $1,800,000 1,300,000 Cost of goods sold and operating expenses Net operating income $ 300,000 $ 500,000 Average invested assets $1,200,000 $1,800,000 The company's hurdle rate is 6 percent. Required: 1. Calculate return on investment (ROI) and residual income for each division for last year. 2. Recalculate ROI and residual income for each division for each independent situation that follows: a. Operating income increases by 10 percent. b. Operating income decreases by 10 percent. c. The company invests $250,000 in each division, an amount that generates $100,000 additional income per division. d. Coolbrook changes its hurdle rate to 10 percent. Complete this question by entering your answers in the tabs below. Req 1 Reg 2A Req 28 Reg 20 Reg 2D Calculate return on investment (ROI) and residual income for each division for last year. (Enter your ROI…
Problem 11-19 (Algo) Comparison of Performance Using Return on Investment (ROI) [L011- Comparative data on three companies in the same service industry are given below. Required: 2. Fill in the missing information. (Round the "Turnover" and "ROI" answers to 2 decimal places.) Company A Sales $ 3,910,000 2$ 1,878,000 Net operating income $ 469,200 356,820 Average operating assets Margin $ 1,700,000 $ 2,660,000 4 % Turnover 1.50 Return on investment (ROI) 11.40 %
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Coolbrook Company has the following information available for the past year: River Division Stream Division Sales revenue $ 1,209,000 $ 1,810,000 Cost of goods sold and operating expenses 900,000 1,286,000 Net operating income $ 309,000 $ 524,000 Average invested assets $ 1,200,000 $ 1,460,000 The company’s hurdle rate is 6.26 percent. Required: 1. Calculate return on investment (ROI) and residual income for each division for last year. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.)) river steam ROI % % Residual income (loss) 2. Recalculate ROI and residual income for the division for each independent situation that follows: Operating income increases by 11 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Loss…
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