Requirement a. What is the current ROI for each division? Begin by selecting the formula to calculate ROI, then compute the ROI for each division. Division A Division B Division A Division B + Division A Division B + % % + ▼ = = = Requirement b. What is the current residual income for each division? Begin by selecting the formula to calculate the residual income (RI), then compute the RI for each division. X X ROI X % % % % ) = )= ) = Requirement c. Click is planning an expansion that will require each division to increase its investments by $23,000,000 and its income by $4,500,000. Assuming the managers are evaluated on either ROI or residual income, which division (if either) is pleased with the expansion? Begin by calculating the revised ROI and RI for each division. (Round each percentage to the nearest tenth percent, X.X%.) ROI RI RI

Requirement a. What is the current ROI for each division? Begin by selecting the formula to calculate ROI, then compute the ROI for each division. Division A Division B Division A Division B + Division A Division B + % % + ▼ = = = Requirement b. What is the current residual income for each division? Begin by selecting the formula to calculate the residual income (RI), then compute the RI for each division. X X ROI X % % % % ) = )= ) = Requirement c. Click is planning an expansion that will require each division to increase its investments by $23,000,000 and its income by $4,500,000. Assuming the managers are evaluated on either ROI or residual income, which division (if either) is pleased with the expansion? Begin by calculating the revised ROI and RI for each division. (Round each percentage to the nearest tenth percent, X.X%.) ROI RI RI

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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3. If management desires a minimum acceptable return on investment of 10%, determine the residual income for each division.
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.
On the break-even chart you can see the three variants of the break-even points. Name the items marked with numbers in the figure. Choose the correct answers. 7 10 6 Choose... Choose... 7 Choose... 1 Choose... 9. Choose... v Choose... Total cost function (linear) Turning point of profitability Target profit (expected profit) Turning point of economic efficiency Volume Amortisation Total cost - amortisation Total revenue function Turning point of liquidity Total cost + Target profit
When using data from a segmented income statement, the dollar sales for a segment to break even is equal to: Multiple Choice Common fixed expenses ÷ Segment CM ratio Traceable fixed expenses ÷ Segment CM ratio Non-traceable fixed expenses ÷ Segment CM ratio (Traceable fixed expenses + Common fixed expenses) ÷ Segment CM ratio
CLEAR MY CHOICE Which of the following statements about CVP analysis is false? O a. Operating income calculations in CVP analysis are based on contribution margin not gross margin. O b. All of the given answers are true. O c. Total revenues and total costs are linear in relation to output units. O d. Managers use (CVP) analysis to study the behavior of and relationship among the elements such as total revenues, total costs, and income O e. Unit selling price, unit variable costs, and total fixed costs are known and remain constant. NEXT PAC AGE ere to search
3 Investment center analysis; ROI and residual income Romano Corporation has three operating divisions and requires a 12% return on all investments. Selected information is presented here: Division X Division Y Division Z Revenues $1,000,000 Operating income. Operating assets... Margin.... $ 120,000 $ 500,000 $100,000 $300,000 12% Turnover .. 1 turn 2 turns ROI..... Residual income . $25,000
The major advantage of residual income as a performance measure is that it gives consideration to not only a minimum rate of return on investment but also the total magnitude of income from operations earned by each division. True False
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Find the profit maximizing output given the following revenue and cost functions:R(q) = 1000q – 2q2C(q) = q3 – 59q2 + 1315q + 2000