[The following information applies to the questions displayed below.] Marfar Industries produces metal stamping equipment. The company expanded vertically several years ago by acquiring Bent Press Company, one of its suppliers. Marfar decided to maintain Bent's separate identity and therefore established the Bent Press division as one of its investment centers. Marfar evaluates its divisions on the basis of ROL. Management bonuses are also based on ROI. All investments in operating assets are expected to earn a minimum required rate of return of 12 percent. Bent's ROI has ranged from 15 percent to 18 percent since it was acquired by Marfar. During the past year, Bent had an investment opportunity that would have yielded an estimated rate of return of 14 percent. Bent's management decided against the investment because it believed the investment would decrease the division's overall ROI. Last year's income statement for the Bent Press division is given. The division's operating assets employed were $14,310,000 at the end of the year, which represents a 6 percent increase over the previous year-end balance. BENT PRESS DIVISION DIVISIONAL INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31 Sales Cost of goods sold Gross margin Less: Operating expenses: Selling expenses Administrative expenses Net operating income $5,620,000 7,208,000 $33,018,000 17,409,000 15,609,000 12,828,000 $ 2,781,000 a. Compute the following performance measures for the Bent Press Division: < Prev ROI where the investment base is the average operating assets (based on the beginning of 1. the year plus the end of the year assets) divided by two. Break ROI into both capital turnover and return on sales 18 19 20
[The following information applies to the questions displayed below.] Marfar Industries produces metal stamping equipment. The company expanded vertically several years ago by acquiring Bent Press Company, one of its suppliers. Marfar decided to maintain Bent's separate identity and therefore established the Bent Press division as one of its investment centers. Marfar evaluates its divisions on the basis of ROL. Management bonuses are also based on ROI. All investments in operating assets are expected to earn a minimum required rate of return of 12 percent. Bent's ROI has ranged from 15 percent to 18 percent since it was acquired by Marfar. During the past year, Bent had an investment opportunity that would have yielded an estimated rate of return of 14 percent. Bent's management decided against the investment because it believed the investment would decrease the division's overall ROI. Last year's income statement for the Bent Press division is given. The division's operating assets employed were $14,310,000 at the end of the year, which represents a 6 percent increase over the previous year-end balance. BENT PRESS DIVISION DIVISIONAL INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31 Sales Cost of goods sold Gross margin Less: Operating expenses: Selling expenses Administrative expenses Net operating income $5,620,000 7,208,000 $33,018,000 17,409,000 15,609,000 12,828,000 $ 2,781,000 a. Compute the following performance measures for the Bent Press Division: < Prev ROI where the investment base is the average operating assets (based on the beginning of 1. the year plus the end of the year assets) divided by two. Break ROI into both capital turnover and return on sales 18 19 20
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![[The following information applies to the questions displayed below.]
Marfar Industries produces metal stamping equipment. The company expanded vertically several years ago by acquiring
Bent Press Company, one of its suppliers. Marfar decided to maintain Bent's separate identity and therefore established
the Bent Press division as one of its investment centers.
Marfar evaluates its divisions on the basis of ROL Management bonuses are also based on ROI. All investments in
operating assets are expected to earn a minimum required rate of return of 12 percent.
Bent's ROI has ranged from 15 percent to 18 percent since it was acquired by Marfar. During the past year, Bent had an
investment opportunity that would have yielded an estimated rate of return of 14 percent. Bent's management decided
against the investment because it believed the investment would decrease the division's overall ROI.
Last year's income statement for the Bent Press division is given. The division's operating assets employed were
$14,310,000 at the end of the year, which represents a 6 percent increase over the previous year-end balance.
BENT PRESS DIVISION
DIVISIONAL INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31
Sales
Cost of goods sold
Gross margin
Less: Operating expenses:
Selling expenses
Administrative expenses
Net operating income
$5,620,000
7,208,000
$33,018,000
17,409,000
15,609,000
12,828,000
$ 2,781,000
a. Compute the following performance measures for the Bent Press Division:
< Prev
ROI where the investment base is the average operating assets (based on the beginning of
1. the year plus the end of the year assets) divided by two. Break ROI into both capital
turnover and return on sales
18 19 20](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd2f528c6-531a-4aaf-8be6-1b253d540a00%2F7b5c82d9-3503-4865-9325-9315a88c0955%2Flwpm8n_processed.jpeg&w=3840&q=75)
Transcribed Image Text:[The following information applies to the questions displayed below.]
Marfar Industries produces metal stamping equipment. The company expanded vertically several years ago by acquiring
Bent Press Company, one of its suppliers. Marfar decided to maintain Bent's separate identity and therefore established
the Bent Press division as one of its investment centers.
Marfar evaluates its divisions on the basis of ROL Management bonuses are also based on ROI. All investments in
operating assets are expected to earn a minimum required rate of return of 12 percent.
Bent's ROI has ranged from 15 percent to 18 percent since it was acquired by Marfar. During the past year, Bent had an
investment opportunity that would have yielded an estimated rate of return of 14 percent. Bent's management decided
against the investment because it believed the investment would decrease the division's overall ROI.
Last year's income statement for the Bent Press division is given. The division's operating assets employed were
$14,310,000 at the end of the year, which represents a 6 percent increase over the previous year-end balance.
BENT PRESS DIVISION
DIVISIONAL INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31
Sales
Cost of goods sold
Gross margin
Less: Operating expenses:
Selling expenses
Administrative expenses
Net operating income
$5,620,000
7,208,000
$33,018,000
17,409,000
15,609,000
12,828,000
$ 2,781,000
a. Compute the following performance measures for the Bent Press Division:
< Prev
ROI where the investment base is the average operating assets (based on the beginning of
1. the year plus the end of the year assets) divided by two. Break ROI into both capital
turnover and return on sales
18 19 20
Transcribed Image Text:a. Compute the following performance measures for the Bent Press Division:
ROI where the investment base is the average operating assets (based on the beginning of
1. the year plus the end of the year assets) divided by two. Break ROI into both capital
turnover and return on sales.
2. Residual income.
%
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