Elway Company provided the following income statement for the last year: Sales $865,050,000 Less: Variable expenses 550,973,000 Contribution margin $314,077,000 Less: Fixed expenses 192,762,000 Operating income $121,315,000 At the beginning of last year, Elway had $38,661,000 in operating assets. At the end of the year, Elway had $41,350,000 in operating assets. Required: 1. Compute average operating assets. $fill in the blank 1 2. Compute the margin (as a percent) and turnover ratios for last year. If required, round your answers to two decimal places. Margin fill in the blank 2 % Turnover fill in the blank 3 3. Compute ROI as a percent. Use the part 2 final answers in these calculations and round the final answer to two decimal places. fill in the blank 4 % 4. ROI measures a company’s ability to generate relative to its investment in assets. The greater the ROI, the efficiently the company is generating from its assets. 5. CONCEPTUAL CONNECTION Comment on why the ROI for Elway Company is relatively high (as compared to the lower ROI of a typical manufacturing company). Elway Company might be a service organization with relatively few physical assets required to generate its sales revenue and income. ROI will be higher when the factors that create a company’s sales or income are not formally recognized as assets (e.g. human talent). Elway Company might be a service organization with relatively few physical assets required and generates an income much higher than any manufacturing organization. ROI will be higher when the factors that create a company’s sales or income are not formally recognized as assets (e.g. human talent). Elway Company might be a service organization with relatively few physical assets required and generates an income much higher than any manufacturing organization. ROI will be higher when the factors that create a company’s sales or income are not formally recognized as assets (e.g. goodwill).
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Margin, Turnover,
Elway Company provided the following income statement for the last year:
| Sales | $865,050,000 |
| Less: Variable expenses | 550,973,000 |
| Contribution margin | $314,077,000 |
| Less: Fixed expenses | 192,762,000 |
| Operating income | $121,315,000 |
At the beginning of last year, Elway had $38,661,000 in operating assets. At the end of the year, Elway had $41,350,000 in operating assets.
Required:
1. Compute average operating assets.
$fill in the blank 1
2. Compute the margin (as a percent) and turnover ratios for last year. If required, round your answers to two decimal places.
| Margin | fill in the blank 2 % |
| Turnover | fill in the blank 3 |
3. Compute ROI as a percent. Use the part 2 final answers in these calculations and round the final answer to two decimal places.
fill in the blank 4 %
4. ROI measures a company’s ability to generate
relative to its investment in assets. The greater the ROI, the
efficiently the company is generating from its assets.
5. CONCEPTUAL CONNECTION Comment on why the ROI for Elway Company is relatively high (as compared to the lower ROI of a typical manufacturing company).
- Elway Company might be a service organization with relatively few physical assets required to generate its sales revenue and income. ROI will be higher when the factors that create a company’s sales or income are not formally recognized as assets (e.g. human talent).
- Elway Company might be a service organization with relatively few physical assets required and generates an income much higher than any manufacturing organization. ROI will be higher when the factors that create a company’s sales or income are not formally recognized as assets (e.g. human talent).
- Elway Company might be a service organization with relatively few physical assets required and generates an income much higher than any manufacturing organization. ROI will be higher when the factors that create a company’s sales or income are not formally recognized as assets (e.g.
goodwill ).
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