ROI performance measures based on historical cost and current cost. Nature's Juice Corporation operates three divisions that process and bottle natural fruit juices. The historical-cost accounting system reports the following information for 2017: Passion Fruit Division Kiwi Fruit Division Mango Fruit Division S1,800,000 Revenues $1,300,000 $2,400,000 Operating costs (excluding plant depreciation) 900,000 290,000 $1,210,000 550,000 1,050,000 Plant depreciation 270,000 $ 480,000 175,000 S 575,000 Operating income $ 425,000 $ 600,000 1,575,000 $2,175,000 $ 700,000 3,190,000 $3.890,000 Current assets Long-term assets-plant 540,000 Total assets $ 965,000 Nature's Juice estimates the useful life of each plant to be 12 years, with no terminal disposal value. The straight-line depreciation method is used. At the end of 2017, the passion fruit plant is 10 years old, the kiwi fruit plant is 3 years old, and the mango fruit plant is 1 year old. An index of construction costs over the 10-year period that Nature's Juice has been operating (2007 year-end = 100) is as follows: 2007 100 2016 185 2017 200 2014 120 Given the high turnover of current assets, management believes that the historical-cost and current-cost measures of current assets are approximately the same.
ROI performance measures based on historical cost and current cost. Nature's Juice Corporation operates three divisions that process and bottle natural fruit juices. The historical-cost accounting system reports the following information for 2017: Passion Fruit Division Kiwi Fruit Division Mango Fruit Division S1,800,000 Revenues $1,300,000 $2,400,000 Operating costs (excluding plant depreciation) 900,000 290,000 $1,210,000 550,000 1,050,000 Plant depreciation 270,000 $ 480,000 175,000 S 575,000 Operating income $ 425,000 $ 600,000 1,575,000 $2,175,000 $ 700,000 3,190,000 $3.890,000 Current assets Long-term assets-plant 540,000 Total assets $ 965,000 Nature's Juice estimates the useful life of each plant to be 12 years, with no terminal disposal value. The straight-line depreciation method is used. At the end of 2017, the passion fruit plant is 10 years old, the kiwi fruit plant is 3 years old, and the mango fruit plant is 1 year old. An index of construction costs over the 10-year period that Nature's Juice has been operating (2007 year-end = 100) is as follows: 2007 100 2016 185 2017 200 2014 120 Given the high turnover of current assets, management believes that the historical-cost and current-cost measures of current assets are approximately the same.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Compute the ROI ratio (operating income to total assets) of each division using historical-cost measures. Comment on the results.
Transcribed Image Text:ROI performance measures based on historical cost and current cost. Nature's Juice Corporation
operates three divisions that process and bottle natural fruit juices. The historical-cost accounting system
reports the following information for 2017:
Passion Fruit Division Kiwi Fruit Division Mango Fruit Division
S1,800,000
Revenues
$1,300,000
$2,400,000
Operating costs
(excluding plant depreciation)
900,000
290,000
$1,210,000
550,000
1,050,000
Plant depreciation
270,000
$ 480,000
175,000
S 575,000
Operating income
$ 425,000
$ 600,000
1,575,000
$2,175,000
$ 700,000
3,190,000
$3.890,000
Current assets
Long-term assets-plant
540,000
Total assets
$ 965,000
Transcribed Image Text:Nature's Juice estimates the useful life of each plant to be 12 years, with no terminal disposal value. The
straight-line depreciation method is used. At the end of 2017, the passion fruit plant is 10 years old, the kiwi
fruit plant is 3 years old, and the mango fruit plant is 1 year old. An index of construction costs over the
10-year period that Nature's Juice has been operating (2007 year-end = 100) is as follows:
2007
100
2016
185
2017
200
2014
120
Given the high turnover of current assets, management believes that the historical-cost and current-cost
measures of current assets are approximately the same.
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