Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial information (in thousands of dollars) for the first year of business follow Sales revenue Income Divisional assets (beginning of year) Current liabilities (beginning of year) R&D expendituresa Carolinas $ 2,400 160 1,000 320 1,200 Northeast $ 7,200 372 1,500 320 1,120 aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming Lasky Manufacturing uses residual income. a-2. Which division had the better performance?

Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial information (in thousands of dollars) for the first year of business follow Sales revenue Income Divisional assets (beginning of year) Current liabilities (beginning of year) R&D expendituresa Carolinas $ 2,400 160 1,000 320 1,200 Northeast $ 7,200 372 1,500 320 1,120 aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming Lasky Manufacturing uses residual income. a-2. Which division had the better performance?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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