
Concept explainers
a.
Determine the fixed asset Turnover Ratio of Company D for Year 1 ad Year 2.
a.

Explanation of Solution
Fixed Asset turnover: It is a ratio that measures the productive capacity of the fixed assets to generate the sales revenue for the company. Thus, it shows the relationship between the net sales and the average total fixed assets. The following is the formula to calculate the ratio:
Calculate the fixed asset turnover ratio:
For Year 1
Sales= $4,880,000
Total average fixed assets= $1,525,000 (1)
Working note 1: Calculate the average total fixed assets.
Beginning total fixed assets = $1,450,000
Ending total fixed assets = $1,600,000
For Year 2
Sales= $5,510,000
Total average fixed assets= $1,900,000 (2)
Working note 2: Calculate the average total fixed assets.
Beginning total fixed assets = $1,600,000
Ending total fixed assets = $2,200,000
Hence, the fixed asset turnover ratio for Year 1 is 3.2 times and for Year 2 is 2.9 times.
b.
Explain whether the change in the fixed asset turnover ratio from Year 1 to Year 2 indicates a favorable or unfavorable change.
b.

Explanation of Solution
The change in the fixed asset turnover ratio from Year 1 to Year 2 indicates an unfavorable change as the ratio decreased from 3.2 to 2.9 times. This is because, the company has inefficienctly utilized the fixed assets that resulted in a lower revenue generation.
Want to see more full solutions like this?
Chapter 10 Solutions
FINAN.ACCOUNTING-W/DGT ACCESS (LOOSE)
- The privately-held Toys "R" Us filed for bankruptcy in fall 2017, it disclosed that it had $5 billion in debt and was spending about $400 million per year for interest on that debt. Toys "R" Us net debt was $109.0 million in 2005, just before being taken over by private equity buyers in 2005. In that takeover, the company incurred $5.3 billion in debt. Sales revenue in the twelve months before the buyout in 2005 were $11.2 billion. Sales in the twelve months ending October 2017 were $11.1 billion. During the bankruptcy and store closing announcement in March 2018, the Toys "R" Us CEO stated that the company had fallen behind on the general upkeep and condition of its stores, which contributed to the decline in sales. It has also faced intense competition from other retailers, such as Amazon.com and Walmart. Toys "R" Us had had plans during 2017 to invest in technology, upgrade its stores to have toy testing areas, and create other features that would draw customers into the stores, but…arrow_forwardDon't use chart gpt solution solve this question general accountingarrow_forwardWhat is the required return?? Accountingarrow_forward
- Ashton Manufacturing's estimated amounts for next year are as follows: Department 1: 。 Manufacturing overhead costs = $90,000 о Direct labor hours = 210,000 DLH • Department 2: Manufacturing overhead costs = $120,000 Direct labor hours = 250,000 DLH What is the company's plantwide overhead rate if direct labor hours are the allocation base?arrow_forwardCan you help me with this question financial accounting?arrow_forwardGet answer the general accounting question not use ai please don'tarrow_forward
- how many units were completed during the period?arrow_forwardSterling Fashion Store had a balance in the Accounts Receivable account of $450,000 at the beginning of the year and a balance of $470,000 at the end of the year. Net credit sales during the year amounted to $2,400,000. What is the average collection period of the receivables in terms of days?arrow_forwardFinancial accountingarrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
- Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningCollege Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College




