Submit testTest Sports Company makes snowboards, downhill skis, cross-country skis, skateboards, surfboards, and inline skates. The company has found it beneficial to split operations into two divisions based on the climaterequired for the sport: Snow Sports and Non-snow Sports. The following divisional information is available for the past year:(Click the icon to view the information.)Test's management has specified a 13% target rate of return. Compute each division's RI. Interpret your results. Are your results consistent with each division's ROI?First, select the formula to calculate residual income (RI).1) = RIThe RI for the Snow Sports division isThe RI for the Non-snow Sports division isBoth divisions haveresidual income. This means that the divisions are earning income at a rate thatmanagement's minimum expectations.Are your results consistent with each division's ROI?This result iswith the ROI calculations.412144 orts Company makes snowboards, downhill skis, cross-country skis, skateboards, surfboards, and inline skates. The company has found it beneficial to split operations ifor the sport: Snow Sports and Non-snow Sports. The following divisional information is available for the past year:ck the icon to view the information.)management has specified a 13% target rate of return. Compute each division's RI. Interpret your results. Are your results consistent with each division's ROI?(...)select the formula to calculate residual income (RI).Data tableme RI for the Snow Sports division isNet SalesRevenueOperatingIncomeAverage TotalAssetsROI20.6%The RI for the Non-snow Sports division is5,600,000 $ 1,008,000 $8,400,000 1,512,0004,900,0007,100,000 21.3%Both divisions haveAre your results consistent with each division's ROI?This result iswith the ROI calculations.PrintDoneescresidual income. This means that thSnow SportsNon-snow Sports$

Residual Income = Operating Income - (Percent Cost of Capital * Average Operating Assets)

mula to calculate residual income (RI). now Sports division is Non-snow Sports division is have Its consistent with each division's ROI? with the ROI calculations. X residual income. This means that th Data table Snow Sports Non-snow Sports Net Sales Revenue $ 5,600,000 $ Operating Income Average Total Assets 1,008,000 $ 8,400,000 1,512,000 Print Done ROI 4,900,000 20.6% 7,100,000 21.3%

mula to calculate residual income (RI). now Sports division is Non-snow Sports division is have Its consistent with each division's ROI? with the ROI calculations. X residual income. This means that th Data table Snow Sports Non-snow Sports Net Sales Revenue $ 5,600,000 $ Operating Income Average Total Assets 1,008,000 $ 8,400,000 1,512,000 Print Done ROI 4,900,000 20.6% 7,100,000 21.3%

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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Residual Income The operating income and the amount of invested assets in each division of Otte Industries are as follows: Operating Income Invested Assets Retail Division $94,600 $430,000 Commercial Division 118,000 590,000 Internet Division 129,200 760,000 Assume that management has established a 10% minimum acceptable rate of return for invested assets. a. Determine the residual income for each division. Retail Division Commercial Division Internet Division Operating income $94,600 $118,000 $129,200 Minimum acceptable operating income as a percent of invested assets Residual income $ $ $ b. Which division has the most residual income?
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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?
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The following information is provided for each division. Net Income $6,100,000 2,758,000 1,000,000 Investment Center Cameras and camcorders Phones and communications Computers and accessories Assume a target income of 14% of average invested assets. Required: Compute residual income for each division. (Enter losses with a minus sign.) Target Income Targeted return Target income Residual Income Residual income (loss) Cameras and Camcorders Cameras and Camcorders Average Assets $ 25,700,000 19,700,000 10,400,000 % Phones and Communications Phones and Communications % Computers and Accessories Computers and Accessories %
am. 103.