XTreme Sports Company makes snowboards, downhill skis, cross-country skis, skateboards, surfboards, and in-line skates. The company has found it beneficial to split operations into two divisionsbased on the climate required for the sport: Snow Sports and Non-Snow Sports. The following divisional information is available for the past year:(Click the icon to view the information.)Compute each division's residual income. Interpret your results. Are your results consistent with each division's ROI?First enter the formula, then calculate each divisions residual income.Data tableSnow SportsNon-Snow SportsSales$ 5,100,000 $8,200,000 $) =Residual incomeOperating IncomeTotal AssetsCurrent LiabilitiesROI867,000 $1,394,000 $4,000,000 $6,200,000 $720,000420,000 21.7%22.5%XTreme's management has specified a target 13% rate of return.☑

Residual Income Calculation and InterpretationFormula:Residual income (RI) = Operating income -…

Answered: XTreme Sports Company makes snowboards,…

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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Navarre Energy Research specializes in developing and commercializing new products. It is organized into two divisions, which are based on the products they produce. Canal Division is smaller, and the lives of the products it produces tend to be shorter than those produced by the larger Lake Division. Selected financial data for the past year are shown in the following table. Divisional investment is as of the beginning of the year. Navarre uses an 8 percent cost of capital and beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes. Allocated corporate overhead Cost of goods sold Divisional investment RAD Sales Selling, general and administrative (excluding R&D) Division Canal (5000) $4,120 20,040 60,500 12,200 50,800 4,560 Lake (5000) $9,400 29,600 398,000 31,800 190,000 7,500 R&D is assumed to have a three-year life in Canal Division and an eight-year life in Lake Division. All R&D expenditures are spent at the beginning of the year. Assume there…
Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the West, Central, and East regions. Each of these regions is about the same size and each has its own manager and sales staff. The company has been experiencing losses for many months. In an effort to improve performance, management has requested that the monthly income statement be segmented by sales region. The company's first effort at preparing a segmented income statement for May is given below. Sales Regional expenses (traceable): Cost of goods sold Advertising Salaries Utilities Depreciation Shipping expense Total regional expenses Regional income (loss) before corporate expenses Corporate expenses: Advertising (general) General administrative expense Total corporate expenses Net operating income (loss) Variable expenses: Total variable expenses Traceable fixed expenses: Total traceable fixed expenses Common fixed expenses: Total common…
Compute the residual income for the Manufacturing Division. Greenlink, Inc. produces environment-friendly construction material. The following information is available about the status and operations of the Manufacturing Division of Greenlink, which has a hurdle rate (minimum required rate of return) of 7%. Divisional identifiable average assets $ 414,459 Divisional income from operations $ 18,848 Divisional sales revenue $ 365,726
Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the West, Central, and East regions. Each of these regions is about the same size and each has its own manager and sales staff. The company has been experiencing losses for many months. In an effort to improve performance, management has requested that the monthly income statement be segmented by sales region. The company's first effort at preparing a segmented income statement for May is given below. Sales Regional expenses (traceable): Cost of goods sold Advertising Salaries Utilities Depreciation Shipping expense Total regional expenses Regional income (loss) before corporate expenses Corporate expenses: Advertising (general) General administrative expense Total corporate expenses Net operating income (loss) Variable expenses: Total variable expenses Traceable fixed expenses: Total traceable fixed expenses Common fixed expenses: Total common…
, a national manufacturer of lawn-mowing and snow-blowing equipment, segments its business according to customer type: Professional and Residential. Assume the following divisional information was available for the past year (in thousands of dollars):
Navarre Energy Research specializes in developing and commercializing new products. It is organized into two divisions, which are based on the products they produce. Canal Division is smaller, and the lives of the products it produces tend to be shorter than those produced by the larger Lake Division. Selected financial data for the past year are shown in the following table. Divisional investment is as of the beginning of the year. Navarre uses an 8 percent cost of capital and beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes. Division Canal ($000) Lake ($000) Allocated corporate overhead $ 4,100 $ 9,600 Cost of goods sold 20,000 30,000 Divisional investment 60,100 400,000 R&D 12,000 32,000 Sales 50,000 100,000 Selling, general and administrative (excluding R&D) 4,500 8,000 R&D is assumed to have a three-year life in Canal Division and an eight-year life in Lake Division. All R&D expenditures are spent…
Submit test Test Sports Company makes snowboards, downhill skis, cross-country skis, skateboards, surfboards, and inline skates. The company has found it beneficial to split operations into two divisions based on the climate required for the sport: Snow Sports and Non-snow Sports. The following divisional information is available for the past year: (Click the icon to view the information.) Test's management has specified a 13% target rate of return. Compute each division's RI. Interpret your results. Are your results consistent with each division's ROI? First, select the formula to calculate residual income (RI). 1) = RI The RI for the Snow Sports division is The RI for the Non-snow Sports division is Both divisions have residual income. This means that the divisions are earning income at a rate that management's minimum expectations. Are your results consistent with each division's ROI? This result is with the ROI calculations. 4 12 144
Hazlett & Family is organized into two geographic markets Northern and Southern. The company makes an off-road vehicle for recreation and agricultural use. The vehicle is sold in three models, depending on the power and options. The three models, from least expensive to most expensive, are the H-L, H-LX, and H-LXS. The company's financial staff has prepared the following forecasted income statement for the upcoming fiscal year (in thousands of dollars): Sales revenue Cost of goods sold. Gross margin Marketing costs. Administrative costs Total marketing and administrative. Operating profits H-L H-LX H-LXS Management has expressed special concern with the Southern market because of the extremely poor return on sales. This market was entered a year ago because it seemed like the best opportunity for growth. Hazlett & Family knew that it would take some time to build profitability in the market, but there has been no noticeable change in the low returns over time. The financial staff has…
The Long Term Care Plus Company has two service departments — actuarial and premium rating, and two operations departments — marketing and sales. The distribution of each service department's efforts to the other departments is shown below: FROM TO Actuarial Rating Marketing Sales Actuarial 0 % 10 % 20 % 70 % Rating 20 % 0 % 40.0 % 40.0 % The direct operating costs of the departments (including both variable and fixed costs) were as follows: Actuarial $ 70,000 Premium Rating $ 130,000 Marketing $ 56,000 Sales $ 65,000 The total cost accumulated in the marketing department using the reciprocal method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar): Multiple Choice $131,510. $151,690. $130,714. $171,759. $179,338.
Middleton Associates is a consulting firm that specializes in information systems for construction and landscaping companies. The firm has two offices-one in Toronto and one in Vancouver. The firm classifies the direct costs of consulting jobs as variable costs. A segmented contribution format income statement for the company's most recent year is given below: Office Sales Variable expenses Contribution margin Traceable fixed expenses Office segment margin Common fixed expenses not traceable to offices Operating income Increase in operating income $ Total Company $900,000 100.0% 414,000 46.00 486,000 54.00 187,200 20.80 298,800 33.20 Required: 1. By how much would the company's operating income increase if Vancouver increased its sales by $87,000 per year? Assume no change in cost behaviour patterns. 43,500 117,000 13.00 $181,800 20.20% Toronto Vancouver $120,000 100% $780,000 100% 390,000 50 24,000 20 96,000 80 390,000 50 140,400 18 46,800 39 $ 49,200 41% $249,600 32% 2-a. Refer to…
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Oriole produces and sells two products-aluminum and vinyl. Each of these products is made in a dedicated manufacturing facility, and the product line managers are evaluated based on the product line's return on investment. The following data is from the most recent year of operations, Aluminum Vinyl Sales $4,000,000 $4,350,000 Variable costs 2,050,000 2,403,750 Direct fixed costs 1,520,000 1,533,000 Average assets 2,000,000 1,500,000 (31) Your answer is correct. Calculate the margin and asset turnover for each product line. (Round answers to 2 decimal places, eg. 5.12 and 5,12%) Aluminum Vinyl Margin 10.75 % 9.50 % 2.00 2.90 Your answer is correct. Calculate return on investment for each product line. (Round ROI to 2 decimal places, e.g. 5.12 %) Aluminum Vinyl ROI 21.50 % 27.55 % eTextbook and Media Attempts: unlimited Both product line managers would like to improve their respective returns on investment, and each manager has a different idea about how to accomplish this. If the…

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