Exercise 15-19 (Algo) Investment center analysis; ROI and residual income LO 15-9 The Northern Division of Allied Incorporated has operating income of $18,500 on sales revenue of $166,000. Divisional operating assets are $80,200, and management of Allied has determined that a minimum return of 13% should be expected from all investments. Required: a. Using the DuPont model, calculate the Northern Division's margin, turnover, and ROI. b. Calculate the Northern Division's residual income. Complete this question by entering your answers in the tabs below. Required A Required B Using the DuPont model, calculate the Northern Division's margin, turnover, and ROI. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Margin Turnover ROI Northern Division % turns % < Required A Required B >

Exercise 15-19 (Algo) Investment center analysis; ROI and residual income LO 15-9 The Northern Division of Allied Incorporated has operating income of $18,500 on sales revenue of $166,000. Divisional operating assets are $80,200, and management of Allied has determined that a minimum return of 13% should be expected from all investments. Required: a. Using the DuPont model, calculate the Northern Division's margin, turnover, and ROI. b. Calculate the Northern Division's residual income. Complete this question by entering your answers in the tabs below. Required A Required B Using the DuPont model, calculate the Northern Division's margin, turnover, and ROI. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Margin Turnover ROI Northern Division % turns % < Required A Required B >

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

Required information 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. Sales revenue Income Division A ? Division B Division C $ 11,000,000 ? $ 530,000 $ 2,130,000 ? Average investment ? $ 2,500,000 ? Sales margin 30% ? 35% Capital turnover 2 ? ? ROI Residual income ? ? ? 40% ? $ 139,000 Required: The following data pertain to three divisions of Nevada Aggregates, Incorporated. The company's required rate of return on invested capital is 10 percent. Note: Round "Capital turnover" answers to 2 decimal places. Division A Division B Division C Sales revenue $ 40,100,000 Income $ 1,650,000 $ 8,822,000 Average investment $ 10,025,000 Sales margin 22 % % 25 % Capital turnover ROI Residual income 1.00 200 % % $ 69 22 % 450,000
Residual Income The income from operations and the amount of invested assets in each division of Beck Industries are as follows: Income from Operations Invested Assets Retail Division $74,100 $390,000 Commercial Division 159,600 760,000 Internet Division 84,000 560,000 Assume that management has established a 12% minimum acceptable return for invested assets. a. Determine the residual income for each division. Retail Division Commercial Division Internet Division Income from operations $74,100 $159,600 $84,000 Minimum acceptable income from operations as a percent of invested assets fill in the blank 1 fill in the blank 2 fill in the blank 3 Residual income $fill in the blank 4 $fill in the blank 5 $fill in the blank 6 b. Which division has the most residual income?
Problem 12-15 Return on Investment (ROI) and Residual Income [LO12-1, LO12-2] Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc.Balance Sheet BeginningBalance EndingBalance Assets Cash $ 129,000 $ 140,000 Accounts receivable 336,000 473,000 Inventory 561,000 477,000 Plant and equipment, net 834,000 810,000 Investment in Buisson, S.A. 400,000 432,000 Land (undeveloped) 254,000 247,000 Total assets $ 2,514,000 $ 2,579,000 Liabilities and Stockholders' Equity Accounts payable $ 384,000 $ 346,000 Long-term debt 967,000 967,000 Stockholders' equity 1,163,000 1,266,000 Total liabilities and stockholders' equity $ 2,514,000 $ 2,579,000 Joel de Paris, Inc.Income Statement Sales $ 4,324,000 Operating expenses 3,805,120 Net operating income 518,880 Interest and taxes: Interest expense 124,000 Tax expense 193,000 317,000 Net income $ 201,880…
a. Compute ROI for Division A.b. Compute residual income for Division B.c. Division A could increase its profit by $40,000 by increasing its investment by $150,000. Computeits total residual income.d. Division A could increase its return on sales by one percentage point, while keeping the same totalsales and investment. Compute its ROI.e. Division B could reduce its investment so that its asset turnover increased by one time, whileholding total sales constant. Compute its ROI.
The South Division of Bramble Company reported the following data for the current year. Sales Variable costs Controllable fixed costs Average operating assets 1. 2. Top management is unhappy with the investment center's return on investment (ROI). It asks the manager of the South Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action. 3. Return on Investment $2,900,000 Increase sales by $300,000 with no change in the contribution margin percentage. Reduce variable costs by $160,000. Reduce average operating assets by 3.00%. 1,943,000 (a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%) Action 1 600,000 5,000,000 Action 2 Action 3 (b) Using the ROI equation, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, e.g. 1.57%) Return on investment % % 1 % %
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.
The following data are available for two divisions of Ryan Enterprises: Alpha Division Beta Division Division operating profit $ 7,360,000 $ 1,240,000 Division investment 32,160,000 3,160,000 The cost of capital for the company is 7 percent. Ignore taxes. Required: a-1. Calculate the ROI for both Alpha and Beta divisions. a-2. If Ryan measures performance using ROI, which division had the better performance? b-1. Calculate the EVA for both Alpha and Beta divisions. (The divisions have no current liabilities.) b-2. If Ryan measures performance using economic value added, which division had the better performance? c. Would your evaluation change if the company’s cost of capital was 10 percent, when evaluated by ROI? when evaluated by EVA?
ROI and Residual Income A multinational corporation has a number of divisions, two of which are the North American Division and the Pacific Rim Division. Data on the two divisions are as follows: North American Pacific Rim Average operating assets $15,000,000 $6,700,000 Operating income 1,250,000 610,000 Minimum required return 7 % 7 % Round all rates of return to four significant digits. Required: 1. Compute residual income for each division. North American $ fill in the blank 1 Pacific Rim $ fill in the blank 2 By comparing residual income, is it possible to make a useful comparison of divisional performance? 2. Compute the residual rate of return by dividing the residual income by the average operating assets. Enter your answers as percentages, rounded to two decimal places. For example, the decimal value .03827 would be entered as "3.83" percent. North American fill in the blank 4 % Pacific Rim fill in the blank 5 % Is it possible now to…
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…
The South Division of Wiig Company reported the following data for the current year. Sales Variable costs Controllable fixed costs Average operating assets 1. 2. 3. Top management is unhappy with the investment center's return on investment (ROI). It asks the manager of the South Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action. Return on Investment $2,950,000 1,947,000 Increase sales by $300,000 with no change in the contribution margin percentage. Reduce variable costs by $155,000. Reduce average operating assets by 4%. Action 1 595,000 (a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%.) Action 2 5,000,000 Action 3 (b) Using the ROI formula, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, e.g. 1.57%.) Return on investment do % % % %
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?
Residual Income The income from operations and the amount of invested assets in each division of Beck Industries are as follows: Income from Operations Invested Assets Retail Division $102,900 Commercial Division 115,000 Internet Division 123,200 Assume that management has established a 8% minimum acceptable return for invested assets. a. Determine the residual income for each division. Income from operations Minimum acceptable of income from operations Residual income b. Which division has the most residual income? Commercial Division 490,000 500,000 770,000 Retail Division Commercial Division $102,900 $115,000 Internet Division $123,200