Vignette #2 The Sports Equipment Company produces a wide variety of sports equipment. Its newest division, Golf Technology, manufactures and sells a single product (AccuDriver), a golf club that uses global positioning satellite technology to improve the accuracy of golfers' shots. The demand for AccuDriver is relatively insensitive to price changes. The following data are available for Golf Technology, which is an investment center for Sports Equipment: Total annual fixed costs Variable cost per AccuDriver Number of Accu Drivers sold each year Average operating assets invested in the division Required Rate of Return 4. If the selling price of AccuDrivers is $800 per club, the Return on Investment (ROI) for the company (in %) is closest to A. 39 B. 17 C. 57 $26,000,000 $600 170,000 $46,000,000 15% 5. If management requires an ROI of at least 25% from the division, the minimum selling price (in USD/unit) that the Golf Technology Division should charge per AccuDriver club is closest to A. 780 B. 800 C. 820 6. The DuPont method of profitability analysis A. Provides a breakdown of the key components of Net Income (NI). B. Provides a breakdown of the key components of Residual Income (RI). C. Provides a breakdown of the key components of Return on Investment (ROI). 7. "RI is not identical to ROI, although both measures incorporate income and investment into their computations." Do you agree? A. Yes. ROI is expressed as an absolute amount of USD while RI is measured in as a percentage of total investment. B. Yes. ROI is expressed as a percentage while RI is measured in absolute amount of USD. C. Yes. ROI also includes soft factors such as customer satisfaction as a measure of the success of the company.
Vignette #2 The Sports Equipment Company produces a wide variety of sports equipment. Its newest division, Golf Technology, manufactures and sells a single product (AccuDriver), a golf club that uses global positioning satellite technology to improve the accuracy of golfers' shots. The demand for AccuDriver is relatively insensitive to price changes. The following data are available for Golf Technology, which is an investment center for Sports Equipment: Total annual fixed costs Variable cost per AccuDriver Number of Accu Drivers sold each year Average operating assets invested in the division Required Rate of Return 4. If the selling price of AccuDrivers is $800 per club, the Return on Investment (ROI) for the company (in %) is closest to A. 39 B. 17 C. 57 $26,000,000 $600 170,000 $46,000,000 15% 5. If management requires an ROI of at least 25% from the division, the minimum selling price (in USD/unit) that the Golf Technology Division should charge per AccuDriver club is closest to A. 780 B. 800 C. 820 6. The DuPont method of profitability analysis A. Provides a breakdown of the key components of Net Income (NI). B. Provides a breakdown of the key components of Residual Income (RI). C. Provides a breakdown of the key components of Return on Investment (ROI). 7. "RI is not identical to ROI, although both measures incorporate income and investment into their computations." Do you agree? A. Yes. ROI is expressed as an absolute amount of USD while RI is measured in as a percentage of total investment. B. Yes. ROI is expressed as a percentage while RI is measured in absolute amount of USD. C. Yes. ROI also includes soft factors such as customer satisfaction as a measure of the success of the company.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Vignette #2
The Sports Equipment Company produces a wide variety of sports equipment. Its
newest division, Golf Technology, manufactures and sells a single product
(AccuDriver), a golf club that uses global positioning satellite technology to improve
the accuracy of golfers' shots. The demand for AccuDriver is relatively insensitive to
price changes. The following data are available for Golf Technology, which is an
investment center for Sports Equipment:
Total annual fixed costs
Variable cost per AccuDriver
Number of Accu Drivers sold each year
Average operating assets invested in the division
Required Rate of Return
4. If the selling price of AccuDrivers is $800 per club, the Return on Investment (ROI)
for the company (in %) is closest to
A. 39
B. 17
C. 57
$26,000,000
$600
170,000
$46,000,000
15%
5. If management requires an ROI of at least 25% from the division, the minimum
selling price (in USD/unit) that the Golf Technology Division should charge per
AccuDriver club is closest to
A. 780
B. 800
C. 820
6. The DuPont method of profitability analysis
A. Provides a breakdown of the key components of Net Income (NI).
B. Provides a breakdown of the key components of Residual Income (RI).
C. Provides a breakdown of the key components of Return on Investment (ROI).
7. "RI is not identical to ROI, although both measures incorporate income and
investment into their computations." Do you agree?
A. Yes. ROI is expressed as an absolute amount of USD while Rl is measured in
as a percentage of total investment.
B. Yes. ROI is expressed as a percentage while RI is measured in absolute
amount of USD.
C. Yes. ROI also includes soft factors such as customer satisfaction as a
measure of the success of the company.
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