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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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
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, 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):
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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
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