Estes Company has assembled the following data for its divisions for the past year: Average operating assets Division A Division B Sales.................. Net operating income Turnover Margin........... $500,000 ? ? $520,000 $100,000 $20,300 1.25 4 ? 3.9% ? ? $6,000 Minimum required rate of return 14% Residual income Division B's average operating assets is: $81,200 $2,080,000 $1,333,333 $130,000

Estes Company has assembled the following data for its divisions for the past year: Average operating assets Division A Division B Sales.................. Net operating income Turnover Margin........... $500,000 ? ? $520,000 $100,000 $20,300 1.25 4 ? 3.9% ? ? $6,000 Minimum required rate of return 14% Residual income Division B's average operating assets is: $81,200 $2,080,000 $1,333,333 $130,000

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 18E: The following selected data pertain to the Argent Division for last year: Required: 1. How much is...

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Margin, Turnover, Return on Investment, Average Operating Assets Elway Company provided the following income statement for the last year: At the beginning of last year, Elway had 28,300,000 in operating assets. At the end of the year, Elway had 23,700,000 in operating assets. Required: 1. Compute average operating assets. 2. Compute the margin and turnover ratios for last year. (Note: Round the answer for margin ratio to two decimal places.) 3. Compute ROI. (Note: Round answer to two decimal places.) 4. CONCEPTUAL CONNECTION Briefly explain the meaning of ROI. 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).
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%
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Selected data from Division A of Green Company are as follows: Sales $ 490,000 Average investment $ 416,500 Operating income $ 83,300 Minimum rate of return 16 % Division A's asset turnover (AT) is (rounded to two decimal places):
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Kyle Corporation provides the following information for the Product Division and Service Division for the year. Product Division Service Division 420,000 $ 650,000 195,000 245,000 640,000 610,000 14.0% 14.0% Net sales Operating income Average total assets Target rate of return $ Requirement 1. Calculate the return on investment for each division. (Enter answers as a percent rounded to the nearest hundredth percent, X.XX%) The return on investment for the Product Division is The return on investment for the Service Division is Requirement 2. Which division has the highest ROI? % % Requirement 3. Calculate the residual income for each division. (Round answers to the nearest whole dollar.) The residual income for the Product Division is The residual income for the Service Division is Requirement 4. Which division has the highest residual income?
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