Presented below is information related to the Southern Division of Lumber, Inc. Contribution margin$1,235,600 Controllable margin$931,270 Average operating assets$4,049,000 Minimum rate of return16% Compute the Southern Division’s return on investment and residual income. Return on investment % Residual income $

Presented below is information related to the Southern Division of Lumber, Inc. Contribution margin$1,235,600 Controllable margin$931,270 Average operating assets$4,049,000 Minimum rate of return16% Compute the Southern Division’s return on investment and residual income. Return on investment % Residual income $

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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The operating income and the amount of invested assets in each division of Conley Industries are as follows: Operating income Invested Assets Retail Division $103,400 $470,000 Commercial Division 105,000 420,000 Internet Division 130,000 500,000 Assume that management has established a 10% minimum acceptable return for invested assets. a. Determine the residual income for each division. Retail Division Commercial Division Internet Division Operating income $103,400 $105,000 $130,000 Minimum acceptable operating income as a percent of invested assets Residual income $ $ $ b. Which division has the most residual income?
Swifty, Inc. reports the following financial information for its sports clothing segment.Average operating assets$3,056,000Controllable margin$641, 760 Minimum rate of return7 % Compute the return on investment and the residual income for the segment. Return on investment % Residual income
Residual Income The Commercial Division of Galena Company has operating income of $264,070 and assets of $549,000. The minimum acceptable return on assets is 13%. What is the residual income for the division?
Knowledge Check East Division of Blue Spruce Anchors provided the following information: Contribution margin Controllable margin Average operating assets Minimum rate of return Return on investment $890,000 $395,900 $2,140,000 Compute the return on investment and the residual income. (Round return on investment answer to two decimal places (e.g., 15.25%).) Residual income 9 % %
Dd3. For the most recent year, Petunia Company had the following data for its Clarkston Division, an investment center: total contribution margin—$671,110 budget, $695,741 actual; controllable fixed costs—$298,900 budget, $295,702 actual. Average operating assets for the year were $1,959,045. Determine the actual return on investment.
Presented below is selected financial information for two divisions of Crane Brewing. Supply the missing information for the lettered items. Lager Lite Lager Contribution margin $500,000 $299,200 Controllable margin 199,920 (c) Average operating assets $ (a) $1,200,900 Minimum rate of return $ % (b) 14 % Return on investment Residual income 21 % $104,720 % (d) $204,153
Residual Income The Commercial Division of Galena Company has income from operations of $143,640 and assets of $399,000. The minimum acceptable return on assets is 10%. What is the residual income for the division?$fill in the blank 1
(J) Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division ADivision BDivision CSales$ 12,120,000$ 28,120,000$ 20,120,000Average operating assets$ 3,030,000$ 7,030,000$ 5,030,000Net operating income$ 496,920$ 449,920$ 503,000Minimum required rate of return7.00%7.50%10.00%Required: 1. Compute the margin, turnover, and return on investment (ROI) for each division. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 8% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept the opportunity