Selected sales and operating data for three divisions of different structural engineering firms are given as follows:Division A$ 5,000,000$ 1,000,00024Division C$ 8,100, 000$ 1,620, 000$4Division B$ 9,000, 000$ 4,500,000$4SalesAverage operating assetsNet operating incomeMinimum required rate of return205,000729, 000109, 35016.00%16.20%13.00%Required:1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover.2. Compute the residual income (loss) for each division.3. Assume that each division is presented with an investment opportunity that would yield a 16% rate of return.a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity?b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity?Complete this question by entering your answers in the tabs below.Req 1Req 2Req 3Adeg 3BAssume that each division is presented with an investment opportunity that would yield a 16% rate of return. If performanceis being measured by residual income, which division or divisions will probably accept or reject the opportunity?Division ADivision BDivision C

Return on investment represents the return the company gets in return of the money invested.

Answered: Selected sales and operating data for…

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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Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A $ 12,480,000 $ 3,120,000 $ 561,600 8.00% Division B Division C Sales Average operating assets Net operating income Minimum required rate of return $ 28,480,000 $ 7,120,000 $ 512,640 $ 20,480, 000 $ 5,120,000 $ 532,480 10.40% 8.50% 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 9% 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? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B Compute the margin, turnover, and return on investment…
Rundle Transport Company divides its operations into four divisions. A recent income statement for its West Division follows. RUNDLE TRANSPORT COMPANY West Division Income Statement for Year 3 Revenue $ 620,000 Salaries for drivers (470,000 ) Fuel expenses (62,000 ) Insurance (82,000 ) Division-level facility-sustaining costs (52,000 ) Companywide facility-sustaining costs (142,000 ) Net loss $ (188,000 ) Required By how much would companywide income increase or decrease if West Division is eliminated? Should West Division be eliminated? Assume that West Division is able to increase its revenue to $690,000 by raising its prices. Determine the amount of the increase or decrease that would occur in companywide net income if the segment were eliminated. Should West Division be eliminated if revenue were $690,000? What is the minimum amount of revenue required to justify continuing the operation of West Division?
Madonna Company had the following results for its make-up division. Sales $1,000,000 Contribution margin 300,000 Total direct fixed costs 140,000 Allocated fixed costs 60,000 Average total operating assets 400,000 What is the controllable margin for the year?
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 %
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?
Assume a company with two divisions (A and B) prepared the following segmented income statement: A B Total Sales $ 300,000 $ 200,000 $ 500,000 Variable expenses 120,000 140,000 260,000 Contribution margin 180,000 60,000 240,000 Traceable fixed expenses 100,000 80,000 180,000 Segment margin $ 80,000 $ (20,000) 60,000 Common fixed expenses 50,000 Net operating income $ 10,000 The dollar sales required for the company to break even is closest to:
Selected sales and operating data for three divisions of different structural engineering firms are given below: Division C $ 25,450,000 $ 5,090,000 $636,250 12.50% Sales Average operating assets Net operating income Minimum required rate of return Division A $ 12,360,000 $ 3,090,000 $ 494,400 7.00% Required: 1. Compute each division's margin, turnover, and return on investment (ROI). 2. Compute each division's residual income (loss). 3. Assume each division is presented with an investment opportunity yielding a 8% rate of return. a. If performance is being measured by ROI, which division or divisions will accept the opportunity? b. If performance is being measured by residual income, which division or divisions will accept the opportunity? Division B $ 28,360,000 $ 7,090,000 $ 453,760 7.50% Complete this question by entering your answers in the tabs below. Division A Division B Division C Required 1 Required 2 Required 3A Required 3B Assume each division is presented with an…
Davenport Incorporated has two divisions, Howard and Jones. The following is the segmented income statement for the past month: Howard Jones Total Sales revenue $ 800,000 $ 600,000 $ 1,400,000 Variable costs 400,000 480,000 880,000 Contribution margin $ 400,000 $ 120,000 $ 520,000 Direct fixed costs 200,000 100,000 300,000 Segment margin $ 200,000 $ 20,000 $ 220,000 Fixed costs (allocated) 150,000 150,000 300,000 Net operating income (loss) $ 50,000 $ (130,000) $ (80,000) What would Davenport's income (loss) be if the Jones Division was dropped?
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 $102,900 Commercial Division 115,000 Internet Division 123,200 Assume that management has established a 8% minimum acceptable return for invested assets. a. Determine the residual income for each division. Income from operations Minimum acceptable of income from operations Residual income b. Which division has the most residual income? Commercial Division 490,000 500,000 770,000 Retail Division Commercial Division $102,900 $115,000 Internet Division $123,200
Kyle Corporation provides the following information for the Product Division and Service Division for the year. Product Division Service Division 420,000 $ 650,000 195,000 245,000 640,000 610,000 14.0% 14.0% Net sales Operating income Average total assets Target rate of return $ Requirement 1. Calculate the return on investment for each division. (Enter answers as a percent rounded to the nearest hundredth percent, X.XX%) The return on investment for the Product Division is The return on investment for the Service Division is Requirement 2. Which division has the highest ROI? % % Requirement 3. Calculate the residual income for each division. (Round answers to the nearest whole dollar.) The residual income for the Product Division is The residual income for the Service Division is Requirement 4. Which division has the highest residual income?
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

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