H6. Navarre Energy Research specializes in developing and commercializing new products. It is organized into two divisions, which arebased on the products they produce. Canal Division is smaller, and the lives of the products it produces tend to be shorter than thoseproduced by the larger Lake Division. Selected financial data for the past year are shown in the following table. Divisional investment isas of the beginning of the year. Navarre uses an 8 percent cost of capital and beginning-of-the-year investment when computing ROIand residual income. Ignore income taxes.Allocated corporate overheadCost of goods soldDivisional investment.R&DSalesSelling, general and administrative(excluding R&D)Economic value addedDivisionCanal ($000)$ 4,10020,00060,10012,00050,0004,500CanalDivisionR&D is assumed to have a three-year life in Canal Division and an eight-year life in Lake Division. All R&D expenditures are spent at thebeginning of the year. Assume there are no current liabilities and (unrealistically) that no R&D investments had taken place before thisyear.Required:a. Compute EVA for the two divisions.Note: Do not round intermediate calculations. Enter your answers in thousands of dollars.LakeDivisionLake ($000)$ 9,60030,000400,00032,000100,0008,000< Prev5 of 5#Next >

EVA stands for economic value added and is a part of fundamental analysis and is used to determine…

Answered: Required: a. Compute EVA for the two…

Required: a. Compute EVA for the two divisions. Note: Do not round intermediate calculations. Enter your answers in thousands of dollars. Economic value added Canal Division Lake Division

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter11: Performance Evaluation And Decentralization

Section: Chapter Questions

Problem 32E: Use the following information for Exercises 11-31 and 11-32: Washington Company has two divisions:...

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Navarre Energy Research specializes in developing and commercializing new products. It is organized into two divisions, which are based on the products they produce. Canal Division is smaller, and the lives of the products it produces tend to be shorter than those produced by the larger Lake Division. Selected financial data for the past year are shown in the following table. Divisional investment is as of the beginning of the year. Navarre uses an 8 percent cost of capital and beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes. Allocated corporate overhead Cost of goods sold Divisional investment RAD Sales Selling, general and administrative (excluding R&D) Division Canal (5000) $4,120 20,040 60,500 12,200 50,800 4,560 Lake (5000) $9,400 29,600 398,000 31,800 190,000 7,500 R&D is assumed to have a three-year life in Canal Division and an eight-year life in Lake Division. All R&D expenditures are spent at the beginning of the year. Assume there…
Navarre Energy Research specializes in developing and commercializing new products. It is organized into two divisions, which are based on the products they produce. Canal Division is smaller, and the lives of the products it produces tend to be shorter than those produced by the larger Lake Division. Selected financial data for the past year are shown in the following table. Divisional investment is as of the beginning of the year. Navarre uses an 8 percent cost of capital and beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes. Division Canal ($000) Lake ($000) Allocated corporate overhead $ 4,100 $ 9,600 Cost of goods sold 20,000 30,000 Divisional investment 60,100 400,000 R&D 12,000 32,000 Sales 50,000 100,000 Selling, general and administrative (excluding R&D) 4,500 8,000 R&D is assumed to have a three-year life in Canal Division and an eight-year life in Lake Division. All R&D expenditures are spent…
Navarre Energy Research specializes in developing and commercializing new products. It is organized into two divisions, which are based on the products they produce. Canal Division is smaller, and the lives of the products it produces tend to be shorter than those produced by the larger Lake Division. Selected financial data for the past year are shown in the following table. Divisional investment is as of the beginning of the year. Navarre uses an 8 percent cost of capital and beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes. Division Canal ($000) Lake ($000) Allocated corporate overhead $ 4,100 $ 9,600 Cost of goods sold 20,000 30,000 Divisional investment 60,100 400,000 R&D 12,000 32,000 Sales 50,000 100,000 Selling, general and administrative (excluding R&D) 4,500 8,000 Required: Compute divisional income for the two divisions. Calculate the operating margin, which is equivalent to the return on sales,…
Navarre Energy Research specializes in developing and commercializing new products. It is organized into two divisions, which are based on the products they produce. Canal Division is smaller, and the lives of the products it produces tend to be shorter than those produced by the larger Lake Division. Selected financial data for the past year are shown in the following table. Divisional investment is as of the beginning of the year. Navarre uses a(n) 8 percent cost of capital and beginning-of- the-year investment when computing ROI and residual income. Ignore income taxes. Allocated corporate overhead Cost of goods sold Divisional investment R&D Sales Selling, general and administrative. (excluding R&D) Division Canal ($000) $4,900 28,000 60,900 12,800 66,008 5,300 Lake (5000) $ 10,000 38,800 400,000 72,000 180,000 7,600 R&D is assumed to have a three-year life in Canal Division and an eight-year life in Lake Division. All R&D expenditures are spent at the beginning of the year. Assume…
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Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of capital of 10 percent. Selected financial information (in thousands of dollars) for the first year of business follows: Sales revenue Income Investment (beginning of year) Current liabilities (beginning of year) R&D expendituresa Divisions 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 BMI uses return on investment (ROI). (Round your final answers to nearest whole percentage value.) East West ROI O East O West % % a-2. Which division had the better performance? East $2,100 750 3,100 310 1,050 acer
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 follows: Sales revenue Income Divisional assets (beginning of year) Current liabilities (beginning of year) R&D expendituresa 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 uses return on investment (ROI). a-2. Which division had the better performance? Complete this question by entering your answers in the tabs below. Req A1 Divisions Carolinas $2,400 160 1,000 320 1,200 Req A2 Carolinas Northeast Evaluate the performance of the two divisions assuming Lasky uses return on investment (ROI). Note: Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1). Northeast $ 7,200 372 1,500 320 1,120 ROI % %
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 follows: Sales revenue Income Divisional assets (beginning of year) Current liabilities (beginning of year) R&D expendituresa 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 uses return on investment (ROI). a-2. Which division had the better performance? Req A1 Complete this question by entering your answers in the tabs below. Divisions Carolinas $ 2,100 170 1,000 290 1,050 Req A2 Carolinas Northeast Northeast $ 6,600 372 1,500 290 970 Evaluate the performance of the two divisions assuming Lasky uses return on investment (ROI). Note: Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1). ROI % %
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 follows: Sales revenue Income Divisional assets (beginning of year) Current liabilities (beginning of year) R&D expendituresa 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 economic value added (EVA). a-2. Which division had the better performance? Complete this question by entering your answers in the tabs below. Req A1 Divisions Req A2 Carolinas Northeast Carolinas $ 1,100 190 1,000 190 550 Evaluate the performance of the two divisions assuming Lasky Manufacturing uses economic value added (EVA). Note: Note: Enter answers in thousands of dollars. Round your answers to 1 decimal place. EVA
Evaluate the performance of the two divisions assuming Lasky Manufacturing uses economic value added (EVA). Note: Note: Enter answers in thousands of dollars. Round your answers to 1 decimal place.
The Custodial Division of Clark's Corporate Services (CCS) has assets of $1.2 million. During the past year, the division had profits of $228,000. CCS has a cost of capital of 7.5 percent. Ignore taxes. Required: a. Compute the divisional ROI for the Custodial Division. b. Compute the divisional RI for the Custodial Division. Complete this question by entering your answers in the tabs below. Required A Required B Compute the divisional ROI for the Custodial Division. Divisional ROI % Required A Required B >