Last year’s margin Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 11, Problem 1TF15

1.

To determine

Last year’s margin

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

1.

Expert Solution

Answer to Problem 1TF15

Last year’s margin is 20%

Explanation of Solution

Computation of margin

Margin=Net operating incomeSales×100Margin=240,0001,200,000×100Margin = 20%

2.

To determine

Last year’s turnover

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

2.

Expert Solution

Answer to Problem 1TF15

Last year’s turnover is 1.6

Explanation of Solution

Computation of turnover

Turnover=SalesNet operating income×100Turnover=1,200,000625,000×100Turnover= 1.6

3.

To determine

Last year’s return on investment (ROI)

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

3.

Expert Solution

Answer to Problem 1TF15

Last year’s return on investments is 40%

Explanation of Solution

Computation of return on investment

Return on Investment =Margin ×TurnoverReturn on Investment =20%×1.6Return on Investment =32%

4.

To determine

Margin related to this year’s investment opportunity

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

4.

Expert Solution

Answer to Problem 1TF15

Margin related to this year’s related to this year’s investment opportunity is 15%

Explanation of Solution

Computation of margin

Margin=Net incomeSales×100Margin=30,000200,000×100Margin=15%

Working notes:

Compute the net operating income

Particulars	Amount

Sales	$200,000
Less: Variable expenses ($200,000−$120,000)	$80,000
Contribution margin (60%×$200,000)	$120,000
Less: Fixed expenses	$90,000

Net operating income	$30,000

5.

To determine

The turnover related to this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

5.

Expert Solution

Answer to Problem 1TF15

The turnover related to this year’s investment opportunity is 1.67

Explanation of Solution

Computation of current year turnover

Current year turnover=SalesTurnoverCurrent year turnover= $200,000$120,000Current year turnover=1.67

6.

To determine

The ROI related to this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

6.

Expert Solution

Answer to Problem 1TF15

The ROI related to this year’s investment opportunity is 25%.

Explanation of Solution

Computation of return on investment

Return on investment =(Margin×Turnover)Return on investment = 15%×1.67Return on investment =25%

7.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the margin it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

7.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the margin it will earn this year is 19.2%.

Explanation of Solution

Current year margin

Current year margin=Net operating incomeSalesCurrent year margin= $230,000$1,200,000Current year margin= 19.2%

8.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the turnover it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

8.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the turnover it will earn this year is 1.61.

Explanation of Solution

Computation of current year turnover

Current year turnover=Net operating incomeSalesCurrent year turnover= $1,200,000$745,000Current year turnover= 1.61

9.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the ROI it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

9.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the ROI it will earn this year is 30.9%.

Explanation of Solution

Computation of return on investment

Return on investment=(Margin×Turnover)Return on investment= 19.2%×1.61Return on investment=30.9%

10.

To determine

Bonus is earned only when the ROI of current year exceeds from last year. Whether she will pursue the investment opportunity and will owner of the company allow pursuing the investments company.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

10.

Expert Solution

Answer to Problem 1TF15

If the return on investment is rejected then CEO of the company should provide preference to the new investment.

Explanation of Solution

Due to previous return on investment is 32% and with the new investment is 30.9%, so this new investment opportunity is not preferred. The company actually requires 15% return on investments but in normal the return on investment is 25%.

If the return on investment is rejected then CEO of the company should provide preference to the new investment.

11.

To determine

Last year’s residual income.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

11.

Expert Solution

Answer to Problem 1TF15

Last year’s residual income is $106,205

Explanation of Solution

Computation of last year residual income

Last year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Last year residual income= ($200,000-($625,000×15%))Last year residual income=$106,250

12.

To determine

Residual income of this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

12.

Expert Solution

Answer to Problem 1TF15

Residual income of this year’s investment opportunity will be $12,000

Explanation of Solution

Computation of current year residual income

Current year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Current year residual income= (30,000-($120,000×15%))Current year residual income=$12,000

13.

To determine

If the company pursues the investments opportunity and otherwise performs the same, explain the residual income it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

13.

Expert Solution

Answer to Problem 1TF15

If the company pursues the investments opportunity and otherwise performs the same, the residual income it will earn this year is $118,250.

Explanation of Solution

Computation of current year residual income

Current year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Current year residual income= ($230,000-($745,000×15%))Current year residual income=$118,250

14.

To determine

Bonus is earned only when the ROI of current year exceeds from last year, whether she will pursue the investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

14.

Expert Solution

Answer to Problem 1TF15

Management will pursue for achieving the investment opportunity as it helps in increasing the residual income by $12,000.

Explanation of Solution

Bonus is earned only when the ROI of current year exceeds from last year. It will be pursued for achieving the investment opportunity as it helps in increasing the residual income by $12,000.

15.

To determine

If contribution margin ratio of investment opportunity was 50% instead of 60% and bonus is earned only when the ROI of current year exceeds from last year. Whether she will pursue the investment opportunity and will owner of the company want to pursue the investments company

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

15.

Expert Solution

Answer to Problem 1TF15

The difference in residual income for current year is of $8,000.

Explanation of Solution

Difference in residual income

Difference in residual income= ( Last year income- Current year residual income)Difference in residual income= $106,250-$98,250Difference in residual income=$8,000

Working notes:

Residual income

Residual income= ( Net operating income− ( Average operating assets× Return on investment ))Residual income=($210,000-($745,000×15%))Residual income=$98,250

Compute net operating income.

Particulars	Amount

Sales	$200,000
Less: Variable expenses ($200,000−$100,000)	$100,000
Contribution margin (50%×$200,000)	$100,000
Less: Fixed expenses	$90,000

Net operating income	$10,000

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Chapter 19 Homework 15 0.87 points eBook Saved Exercise 19-20 (Algo) Contribution margin ratio by sales territory LO A1 Help Save & Exit Submit Check my work Big Bikes manufactures and sells mountain bikes in two sales territories, West Coast and East Coast. Information for the year follows. The company sold 550 bikes in each territory. Per unit Sales price Variable cost of goods sold West Coast $ 1,500 East Coast $ 1,440 830 70 830 Variable selling and administrative expenses 160 Ask a. Compute contribution margin (in dollars) for each sales territory. b. Compute contribution margin ratio for each sales territory. Which sales territory has the better contribution margin ratio? Print Complete this question by entering your answers in the tabs below. References Required A Required B Compute contribution margin (in dollars) for each sales territory. Sales Variable expenses Variable cost of goods sold Variable selling and administrative expenses Contribution margin West Coast East Coast…

Determine the gross margin of this financial accounting question

Answer 2

Question

Chapter 11, Problem 1TF15

1.

To determine

Last year’s margin

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

1.

Expert Solution

Answer to Problem 1TF15

Last year’s margin is 20%

Explanation of Solution

Computation of margin

Margin=Net operating incomeSales×100Margin=240,0001,200,000×100Margin = 20%

2.

To determine

Last year’s turnover

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

2.

Expert Solution

Answer to Problem 1TF15

Last year’s turnover is 1.6

Explanation of Solution

Computation of turnover

Turnover=SalesNet operating income×100Turnover=1,200,000625,000×100Turnover= 1.6

3.

To determine

Last year’s return on investment (ROI)

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

3.

Expert Solution

Answer to Problem 1TF15

Last year’s return on investments is 40%

Explanation of Solution

Computation of return on investment

Return on Investment =Margin ×TurnoverReturn on Investment =20%×1.6Return on Investment =32%

4.

To determine

Margin related to this year’s investment opportunity

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

4.

Expert Solution

Answer to Problem 1TF15

Margin related to this year’s related to this year’s investment opportunity is 15%

Explanation of Solution

Computation of margin

Margin=Net incomeSales×100Margin=30,000200,000×100Margin=15%

Working notes:

Compute the net operating income

Particulars	Amount

Sales	$200,000
Less: Variable expenses ($200,000−$120,000)	$80,000
Contribution margin (60%×$200,000)	$120,000
Less: Fixed expenses	$90,000

Net operating income	$30,000

5.

To determine

The turnover related to this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

5.

Expert Solution

Answer to Problem 1TF15

The turnover related to this year’s investment opportunity is 1.67

Explanation of Solution

Computation of current year turnover

Current year turnover=SalesTurnoverCurrent year turnover= $200,000$120,000Current year turnover=1.67

6.

To determine

The ROI related to this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

6.

Expert Solution

Answer to Problem 1TF15

The ROI related to this year’s investment opportunity is 25%.

Explanation of Solution

Computation of return on investment

Return on investment =(Margin×Turnover)Return on investment = 15%×1.67Return on investment =25%

7.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the margin it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

7.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the margin it will earn this year is 19.2%.

Explanation of Solution

Current year margin

Current year margin=Net operating incomeSalesCurrent year margin= $230,000$1,200,000Current year margin= 19.2%

8.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the turnover it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

8.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the turnover it will earn this year is 1.61.

Explanation of Solution

Computation of current year turnover

Current year turnover=Net operating incomeSalesCurrent year turnover= $1,200,000$745,000Current year turnover= 1.61

9.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the ROI it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

9.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the ROI it will earn this year is 30.9%.

Explanation of Solution

Computation of return on investment

Return on investment=(Margin×Turnover)Return on investment= 19.2%×1.61Return on investment=30.9%

10.

To determine

Bonus is earned only when the ROI of current year exceeds from last year. Whether she will pursue the investment opportunity and will owner of the company allow pursuing the investments company.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

10.

Expert Solution

Answer to Problem 1TF15

If the return on investment is rejected then CEO of the company should provide preference to the new investment.

Explanation of Solution

Due to previous return on investment is 32% and with the new investment is 30.9%, so this new investment opportunity is not preferred. The company actually requires 15% return on investments but in normal the return on investment is 25%.

If the return on investment is rejected then CEO of the company should provide preference to the new investment.

11.

To determine

Last year’s residual income.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

11.

Expert Solution

Answer to Problem 1TF15

Last year’s residual income is $106,205

Explanation of Solution

Computation of last year residual income

Last year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Last year residual income= ($200,000-($625,000×15%))Last year residual income=$106,250

12.

To determine

Residual income of this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

12.

Expert Solution

Answer to Problem 1TF15

Residual income of this year’s investment opportunity will be $12,000

Explanation of Solution

Computation of current year residual income

Current year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Current year residual income= (30,000-($120,000×15%))Current year residual income=$12,000

13.

To determine

If the company pursues the investments opportunity and otherwise performs the same, explain the residual income it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

13.

Expert Solution

Answer to Problem 1TF15

If the company pursues the investments opportunity and otherwise performs the same, the residual income it will earn this year is $118,250.

Explanation of Solution

Computation of current year residual income

Current year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Current year residual income= ($230,000-($745,000×15%))Current year residual income=$118,250

14.

To determine

Bonus is earned only when the ROI of current year exceeds from last year, whether she will pursue the investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

14.

Expert Solution

Answer to Problem 1TF15

Management will pursue for achieving the investment opportunity as it helps in increasing the residual income by $12,000.

Explanation of Solution

Bonus is earned only when the ROI of current year exceeds from last year. It will be pursued for achieving the investment opportunity as it helps in increasing the residual income by $12,000.

15.

To determine

If contribution margin ratio of investment opportunity was 50% instead of 60% and bonus is earned only when the ROI of current year exceeds from last year. Whether she will pursue the investment opportunity and will owner of the company want to pursue the investments company

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

15.

Expert Solution

Answer to Problem 1TF15

The difference in residual income for current year is of $8,000.

Explanation of Solution

Difference in residual income

Difference in residual income= ( Last year income- Current year residual income)Difference in residual income= $106,250-$98,250Difference in residual income=$8,000

Working notes:

Residual income

Residual income= ( Net operating income− ( Average operating assets× Return on investment ))Residual income=($210,000-($745,000×15%))Residual income=$98,250

Compute net operating income.

Particulars	Amount

Sales	$200,000
Less: Variable expenses ($200,000−$100,000)	$100,000
Contribution margin (50%×$200,000)	$100,000
Less: Fixed expenses	$90,000

Net operating income	$10,000

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 11, Problem 1TF15

1.

To determine

Last year’s margin

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

1.

Expert Solution

Answer to Problem 1TF15

Last year’s margin is 20%

Explanation of Solution

Computation of margin

Margin=Net operating incomeSales×100Margin=240,0001,200,000×100Margin = 20%

2.

To determine

Last year’s turnover

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

2.

Expert Solution

Answer to Problem 1TF15

Last year’s turnover is 1.6

Explanation of Solution

Computation of turnover

Turnover=SalesNet operating income×100Turnover=1,200,000625,000×100Turnover= 1.6

3.

To determine

Last year’s return on investment (ROI)

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

3.

Expert Solution

Answer to Problem 1TF15

Last year’s return on investments is 40%

Explanation of Solution

Computation of return on investment

Return on Investment =Margin ×TurnoverReturn on Investment =20%×1.6Return on Investment =32%

4.

To determine

Margin related to this year’s investment opportunity

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

4.

Expert Solution

Answer to Problem 1TF15

Margin related to this year’s related to this year’s investment opportunity is 15%

Explanation of Solution

Computation of margin

Margin=Net incomeSales×100Margin=30,000200,000×100Margin=15%

Working notes:

Compute the net operating income

Particulars	Amount

Sales	$200,000
Less: Variable expenses ($200,000−$120,000)	$80,000
Contribution margin (60%×$200,000)	$120,000
Less: Fixed expenses	$90,000

Net operating income	$30,000

5.

To determine

The turnover related to this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

5.

Expert Solution

Answer to Problem 1TF15

The turnover related to this year’s investment opportunity is 1.67

Explanation of Solution

Computation of current year turnover

Current year turnover=SalesTurnoverCurrent year turnover= $200,000$120,000Current year turnover=1.67

6.

To determine

The ROI related to this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

6.

Expert Solution

Answer to Problem 1TF15

The ROI related to this year’s investment opportunity is 25%.

Explanation of Solution

Computation of return on investment

Return on investment =(Margin×Turnover)Return on investment = 15%×1.67Return on investment =25%

7.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the margin it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

7.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the margin it will earn this year is 19.2%.

Explanation of Solution

Current year margin

Current year margin=Net operating incomeSalesCurrent year margin= $230,000$1,200,000Current year margin= 19.2%

8.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the turnover it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

8.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the turnover it will earn this year is 1.61.

Explanation of Solution

Computation of current year turnover

Current year turnover=Net operating incomeSalesCurrent year turnover= $1,200,000$745,000Current year turnover= 1.61

9.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the ROI it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

9.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the ROI it will earn this year is 30.9%.

Explanation of Solution

Computation of return on investment

Return on investment=(Margin×Turnover)Return on investment= 19.2%×1.61Return on investment=30.9%

10.

To determine

Bonus is earned only when the ROI of current year exceeds from last year. Whether she will pursue the investment opportunity and will owner of the company allow pursuing the investments company.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

10.

Expert Solution

Answer to Problem 1TF15

If the return on investment is rejected then CEO of the company should provide preference to the new investment.

Explanation of Solution

Due to previous return on investment is 32% and with the new investment is 30.9%, so this new investment opportunity is not preferred. The company actually requires 15% return on investments but in normal the return on investment is 25%.

If the return on investment is rejected then CEO of the company should provide preference to the new investment.

11.

To determine

Last year’s residual income.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

11.

Expert Solution

Answer to Problem 1TF15

Last year’s residual income is $106,205

Explanation of Solution

Computation of last year residual income

Last year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Last year residual income= ($200,000-($625,000×15%))Last year residual income=$106,250

12.

To determine

Residual income of this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

12.

Expert Solution

Answer to Problem 1TF15

Residual income of this year’s investment opportunity will be $12,000

Explanation of Solution

Computation of current year residual income

Current year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Current year residual income= (30,000-($120,000×15%))Current year residual income=$12,000

13.

To determine

If the company pursues the investments opportunity and otherwise performs the same, explain the residual income it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

13.

Expert Solution

Answer to Problem 1TF15

If the company pursues the investments opportunity and otherwise performs the same, the residual income it will earn this year is $118,250.

Explanation of Solution

Computation of current year residual income

Current year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Current year residual income= ($230,000-($745,000×15%))Current year residual income=$118,250

14.

To determine

Bonus is earned only when the ROI of current year exceeds from last year, whether she will pursue the investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

14.

Expert Solution

Answer to Problem 1TF15

Management will pursue for achieving the investment opportunity as it helps in increasing the residual income by $12,000.

Explanation of Solution

Bonus is earned only when the ROI of current year exceeds from last year. It will be pursued for achieving the investment opportunity as it helps in increasing the residual income by $12,000.

15.

To determine

If contribution margin ratio of investment opportunity was 50% instead of 60% and bonus is earned only when the ROI of current year exceeds from last year. Whether she will pursue the investment opportunity and will owner of the company want to pursue the investments company

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

15.

Expert Solution

Answer to Problem 1TF15

The difference in residual income for current year is of $8,000.

Explanation of Solution

Difference in residual income

Difference in residual income= ( Last year income- Current year residual income)Difference in residual income= $106,250-$98,250Difference in residual income=$8,000

Working notes:

Residual income

Residual income= ( Net operating income− ( Average operating assets× Return on investment ))Residual income=($210,000-($745,000×15%))Residual income=$98,250

Compute net operating income.

Particulars	Amount

Sales	$200,000
Less: Variable expenses ($200,000−$100,000)	$100,000
Contribution margin (50%×$200,000)	$100,000
Less: Fixed expenses	$90,000

Net operating income	$10,000

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 11, Problem 1TF15

1.

To determine

Last year’s margin

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

1.

Expert Solution

Answer to Problem 1TF15

Last year’s margin is 20%

Explanation of Solution

Computation of margin

Margin=Net operating incomeSales×100Margin=240,0001,200,000×100Margin = 20%

2.

To determine

Last year’s turnover

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

2.

Expert Solution

Answer to Problem 1TF15

Last year’s turnover is 1.6

Explanation of Solution

Computation of turnover

Turnover=SalesNet operating income×100Turnover=1,200,000625,000×100Turnover= 1.6

3.

To determine

Last year’s return on investment (ROI)

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

3.

Expert Solution

Answer to Problem 1TF15

Last year’s return on investments is 40%

Explanation of Solution

Computation of return on investment

Return on Investment =Margin ×TurnoverReturn on Investment =20%×1.6Return on Investment =32%

4.

To determine

Margin related to this year’s investment opportunity

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

4.

Expert Solution

Answer to Problem 1TF15

Margin related to this year’s related to this year’s investment opportunity is 15%

Explanation of Solution

Computation of margin

Margin=Net incomeSales×100Margin=30,000200,000×100Margin=15%

Working notes:

Compute the net operating income

Particulars	Amount

Sales	$200,000
Less: Variable expenses ($200,000−$120,000)	$80,000
Contribution margin (60%×$200,000)	$120,000
Less: Fixed expenses	$90,000

Net operating income	$30,000

5.

To determine

The turnover related to this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

5.

Expert Solution

Answer to Problem 1TF15

The turnover related to this year’s investment opportunity is 1.67

Explanation of Solution

Computation of current year turnover

Current year turnover=SalesTurnoverCurrent year turnover= $200,000$120,000Current year turnover=1.67

6.

To determine

The ROI related to this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

6.

Expert Solution

Answer to Problem 1TF15

The ROI related to this year’s investment opportunity is 25%.

Explanation of Solution

Computation of return on investment

Return on investment =(Margin×Turnover)Return on investment = 15%×1.67Return on investment =25%

7.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the margin it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

7.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the margin it will earn this year is 19.2%.

Explanation of Solution

Current year margin

Current year margin=Net operating incomeSalesCurrent year margin= $230,000$1,200,000Current year margin= 19.2%

8.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the turnover it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

8.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the turnover it will earn this year is 1.61.

Explanation of Solution

Computation of current year turnover

Current year turnover=Net operating incomeSalesCurrent year turnover= $1,200,000$745,000Current year turnover= 1.61

9.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the ROI it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

9.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the ROI it will earn this year is 30.9%.

Explanation of Solution

Computation of return on investment

Return on investment=(Margin×Turnover)Return on investment= 19.2%×1.61Return on investment=30.9%

10.

To determine

Bonus is earned only when the ROI of current year exceeds from last year. Whether she will pursue the investment opportunity and will owner of the company allow pursuing the investments company.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

10.

Expert Solution

Answer to Problem 1TF15

If the return on investment is rejected then CEO of the company should provide preference to the new investment.

Explanation of Solution

Due to previous return on investment is 32% and with the new investment is 30.9%, so this new investment opportunity is not preferred. The company actually requires 15% return on investments but in normal the return on investment is 25%.

If the return on investment is rejected then CEO of the company should provide preference to the new investment.

11.

To determine

Last year’s residual income.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

11.

Expert Solution

Answer to Problem 1TF15

Last year’s residual income is $106,205

Explanation of Solution

Computation of last year residual income

Last year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Last year residual income= ($200,000-($625,000×15%))Last year residual income=$106,250

12.

To determine

Residual income of this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

12.

Expert Solution

Answer to Problem 1TF15

Residual income of this year’s investment opportunity will be $12,000

Explanation of Solution

Computation of current year residual income

Current year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Current year residual income= (30,000-($120,000×15%))Current year residual income=$12,000

13.

To determine

If the company pursues the investments opportunity and otherwise performs the same, explain the residual income it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

13.

Expert Solution

Answer to Problem 1TF15

If the company pursues the investments opportunity and otherwise performs the same, the residual income it will earn this year is $118,250.

Explanation of Solution

Computation of current year residual income

Current year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Current year residual income= ($230,000-($745,000×15%))Current year residual income=$118,250

14.

To determine

Bonus is earned only when the ROI of current year exceeds from last year, whether she will pursue the investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

14.

Expert Solution

Answer to Problem 1TF15

Management will pursue for achieving the investment opportunity as it helps in increasing the residual income by $12,000.

Explanation of Solution

Bonus is earned only when the ROI of current year exceeds from last year. It will be pursued for achieving the investment opportunity as it helps in increasing the residual income by $12,000.

15.

To determine

If contribution margin ratio of investment opportunity was 50% instead of 60% and bonus is earned only when the ROI of current year exceeds from last year. Whether she will pursue the investment opportunity and will owner of the company want to pursue the investments company

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

15.

Expert Solution

Answer to Problem 1TF15

The difference in residual income for current year is of $8,000.

Explanation of Solution

Difference in residual income

Difference in residual income= ( Last year income- Current year residual income)Difference in residual income= $106,250-$98,250Difference in residual income=$8,000

Working notes:

Residual income

Residual income= ( Net operating income− ( Average operating assets× Return on investment ))Residual income=($210,000-($745,000×15%))Residual income=$98,250

Compute net operating income.

Particulars	Amount

Sales	$200,000
Less: Variable expenses ($200,000−$100,000)	$100,000
Contribution margin (50%×$200,000)	$100,000
Less: Fixed expenses	$90,000

Net operating income	$10,000

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 11, Problem 1TF15

1.

To determine

Last year’s margin

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

1.

Expert Solution

Answer to Problem 1TF15

Last year’s margin is 20%

Explanation of Solution

Computation of margin

Margin=Net operating incomeSales×100Margin=240,0001,200,000×100Margin = 20%

2.

To determine

Last year’s turnover

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

2.

Expert Solution

Answer to Problem 1TF15

Last year’s turnover is 1.6

Explanation of Solution

Computation of turnover

Turnover=SalesNet operating income×100Turnover=1,200,000625,000×100Turnover= 1.6

3.

To determine

Last year’s return on investment (ROI)

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

3.

Expert Solution

Answer to Problem 1TF15

Last year’s return on investments is 40%

Explanation of Solution

Computation of return on investment

Return on Investment =Margin ×TurnoverReturn on Investment =20%×1.6Return on Investment =32%

4.

To determine

Margin related to this year’s investment opportunity

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

4.

Expert Solution

Answer to Problem 1TF15

Margin related to this year’s related to this year’s investment opportunity is 15%

Explanation of Solution

Computation of margin

Margin=Net incomeSales×100Margin=30,000200,000×100Margin=15%

Working notes:

Compute the net operating income

Particulars	Amount

Sales	$200,000
Less: Variable expenses ($200,000−$120,000)	$80,000
Contribution margin (60%×$200,000)	$120,000
Less: Fixed expenses	$90,000

Net operating income	$30,000

5.

To determine

The turnover related to this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

5.

Expert Solution

Answer to Problem 1TF15

The turnover related to this year’s investment opportunity is 1.67

Explanation of Solution

Computation of current year turnover

Current year turnover=SalesTurnoverCurrent year turnover= $200,000$120,000Current year turnover=1.67

6.

To determine

The ROI related to this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

6.

Expert Solution

Answer to Problem 1TF15

The ROI related to this year’s investment opportunity is 25%.

Explanation of Solution

Computation of return on investment

Return on investment =(Margin×Turnover)Return on investment = 15%×1.67Return on investment =25%

7.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the margin it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

7.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the margin it will earn this year is 19.2%.

Explanation of Solution

Current year margin

Current year margin=Net operating incomeSalesCurrent year margin= $230,000$1,200,000Current year margin= 19.2%

8.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the turnover it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

8.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the turnover it will earn this year is 1.61.

Explanation of Solution

Computation of current year turnover

Current year turnover=Net operating incomeSalesCurrent year turnover= $1,200,000$745,000Current year turnover= 1.61

9.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the ROI it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

9.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the ROI it will earn this year is 30.9%.

Explanation of Solution

Computation of return on investment

Return on investment=(Margin×Turnover)Return on investment= 19.2%×1.61Return on investment=30.9%

10.

To determine

Bonus is earned only when the ROI of current year exceeds from last year. Whether she will pursue the investment opportunity and will owner of the company allow pursuing the investments company.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

10.

Expert Solution

Answer to Problem 1TF15

If the return on investment is rejected then CEO of the company should provide preference to the new investment.

Explanation of Solution

Due to previous return on investment is 32% and with the new investment is 30.9%, so this new investment opportunity is not preferred. The company actually requires 15% return on investments but in normal the return on investment is 25%.

If the return on investment is rejected then CEO of the company should provide preference to the new investment.

11.

To determine

Last year’s residual income.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

11.

Expert Solution

Answer to Problem 1TF15

Last year’s residual income is $106,205

Explanation of Solution

Computation of last year residual income

Last year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Last year residual income= ($200,000-($625,000×15%))Last year residual income=$106,250

12.

To determine

Residual income of this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

12.

Expert Solution

Answer to Problem 1TF15

Residual income of this year’s investment opportunity will be $12,000

Explanation of Solution

Computation of current year residual income

Current year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Current year residual income= (30,000-($120,000×15%))Current year residual income=$12,000

13.

To determine

If the company pursues the investments opportunity and otherwise performs the same, explain the residual income it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

13.

Expert Solution

Answer to Problem 1TF15

If the company pursues the investments opportunity and otherwise performs the same, the residual income it will earn this year is $118,250.

Explanation of Solution

Computation of current year residual income

Current year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Current year residual income= ($230,000-($745,000×15%))Current year residual income=$118,250

14.

To determine

Bonus is earned only when the ROI of current year exceeds from last year, whether she will pursue the investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

14.

Expert Solution

Answer to Problem 1TF15

Management will pursue for achieving the investment opportunity as it helps in increasing the residual income by $12,000.

Explanation of Solution

Bonus is earned only when the ROI of current year exceeds from last year. It will be pursued for achieving the investment opportunity as it helps in increasing the residual income by $12,000.

15.

To determine

If contribution margin ratio of investment opportunity was 50% instead of 60% and bonus is earned only when the ROI of current year exceeds from last year. Whether she will pursue the investment opportunity and will owner of the company want to pursue the investments company

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

15.

Expert Solution

Answer to Problem 1TF15

The difference in residual income for current year is of $8,000.

Explanation of Solution

Difference in residual income

Difference in residual income= ( Last year income- Current year residual income)Difference in residual income= $106,250-$98,250Difference in residual income=$8,000

Working notes:

Residual income

Residual income= ( Net operating income− ( Average operating assets× Return on investment ))Residual income=($210,000-($745,000×15%))Residual income=$98,250

Compute net operating income.

Particulars	Amount

Sales	$200,000
Less: Variable expenses ($200,000−$100,000)	$100,000
Contribution margin (50%×$200,000)	$100,000
Less: Fixed expenses	$90,000

Net operating income	$10,000

Answer 6

Chapter 11, Problem 1TF15

1.

To determine

Last year’s margin

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

1.

Expert Solution

Answer to Problem 1TF15

Last year’s margin is 20%

Explanation of Solution

Computation of margin

Margin=Net operating incomeSales×100Margin=240,0001,200,000×100Margin = 20%

Answer 7

Chapter 11, Problem 1TF15

1.

To determine

Last year’s margin

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer 8

1.

Expert Solution

Answer to Problem 1TF15

Last year’s margin is 20%

Answer 9

1.

Expert Solution

Answer 10

1.

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Computation of margin

Margin=Net operating incomeSales×100Margin=240,0001,200,000×100Margin = 20%

Answer 13

2.

To determine

Last year’s turnover

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

2.

Expert Solution

Answer to Problem 1TF15

Last year’s turnover is 1.6

Explanation of Solution

Computation of turnover

Turnover=SalesNet operating income×100Turnover=1,200,000625,000×100Turnover= 1.6

Answer 14

2.

To determine

Last year’s turnover

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer 15

2.

Expert Solution

Answer to Problem 1TF15

Last year’s turnover is 1.6

Answer 16

2.

Expert Solution

Answer 17

2.

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Computation of turnover

Turnover=SalesNet operating income×100Turnover=1,200,000625,000×100Turnover= 1.6

Answer 20

3.

To determine

Last year’s return on investment (ROI)

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

3.

Expert Solution

Answer to Problem 1TF15

Last year’s return on investments is 40%

Explanation of Solution

Computation of return on investment

Return on Investment =Margin ×TurnoverReturn on Investment =20%×1.6Return on Investment =32%

Answer 21

3.

To determine

Last year’s return on investment (ROI)

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer 22

3.

Expert Solution

Answer to Problem 1TF15

Last year’s return on investments is 40%

Answer 23

3.

Expert Solution

Answer 24

3.

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

Computation of return on investment

Return on Investment =Margin ×TurnoverReturn on Investment =20%×1.6Return on Investment =32%

Answer 27

4.

To determine

Margin related to this year’s investment opportunity

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

4.

Expert Solution

Answer to Problem 1TF15

Margin related to this year’s related to this year’s investment opportunity is 15%

Explanation of Solution

Computation of margin

Margin=Net incomeSales×100Margin=30,000200,000×100Margin=15%

Working notes:

Compute the net operating income

Particulars	Amount

Sales	$200,000
Less: Variable expenses ($200,000−$120,000)	$80,000
Contribution margin (60%×$200,000)	$120,000
Less: Fixed expenses	$90,000

Net operating income	$30,000

Answer 28

4.

To determine

Margin related to this year’s investment opportunity

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer 29

4.

Expert Solution

Answer to Problem 1TF15

Margin related to this year’s related to this year’s investment opportunity is 15%

Answer 30

4.

Expert Solution

Answer 31

4.

Expert Solution

Answer 32

Expert Solution

Answer 33

Explanation of Solution

Computation of margin

Margin=Net incomeSales×100Margin=30,000200,000×100Margin=15%

Working notes:

Compute the net operating income

Particulars	Amount

Sales	$200,000
Less: Variable expenses ($200,000−$120,000)	$80,000
Contribution margin (60%×$200,000)	$120,000
Less: Fixed expenses	$90,000

Net operating income	$30,000

Answer 34

5.

To determine

The turnover related to this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

5.

Expert Solution

Answer to Problem 1TF15

The turnover related to this year’s investment opportunity is 1.67

Explanation of Solution

Computation of current year turnover

Current year turnover=SalesTurnoverCurrent year turnover= $200,000$120,000Current year turnover=1.67

Answer 35

5.

To determine

The turnover related to this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer 36

5.

Expert Solution

Answer to Problem 1TF15

The turnover related to this year’s investment opportunity is 1.67

Answer 37

5.

Expert Solution

Answer 38

5.

Expert Solution

Answer 39

Expert Solution

Answer 40

Explanation of Solution

Computation of current year turnover

Current year turnover=SalesTurnoverCurrent year turnover= $200,000$120,000Current year turnover=1.67

Answer 41

6.

To determine

The ROI related to this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

6.

Expert Solution

Answer to Problem 1TF15

The ROI related to this year’s investment opportunity is 25%.

Explanation of Solution

Computation of return on investment

Return on investment =(Margin×Turnover)Return on investment = 15%×1.67Return on investment =25%

Answer 42

6.

To determine

The ROI related to this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer 43

6.

Expert Solution

Answer to Problem 1TF15

The ROI related to this year’s investment opportunity is 25%.

Answer 44

6.

Expert Solution

Answer 45

6.

Expert Solution

Answer 46

Expert Solution

Answer 47

Explanation of Solution

Computation of return on investment

Return on investment =(Margin×Turnover)Return on investment = 15%×1.67Return on investment =25%

Answer 48

7.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the margin it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

7.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the margin it will earn this year is 19.2%.

Explanation of Solution

Current year margin

Current year margin=Net operating incomeSalesCurrent year margin= $230,000$1,200,000Current year margin= 19.2%

Answer 49

7.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the margin it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer 50

7.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the margin it will earn this year is 19.2%.

Answer 51

7.

Expert Solution

Answer 52

7.

Expert Solution

Answer 53

Expert Solution

Answer 54

Explanation of Solution

Current year margin

Current year margin=Net operating incomeSalesCurrent year margin= $230,000$1,200,000Current year margin= 19.2%

Answer 55

8.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the turnover it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

8.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the turnover it will earn this year is 1.61.

Explanation of Solution

Computation of current year turnover

Current year turnover=Net operating incomeSalesCurrent year turnover= $1,200,000$745,000Current year turnover= 1.61

Answer 56

8.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the turnover it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer 57

8.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the turnover it will earn this year is 1.61.

Answer 58

8.

Expert Solution

Answer 59

8.

Expert Solution

Answer 60

Expert Solution

Answer 61

Explanation of Solution

Computation of current year turnover

Current year turnover=Net operating incomeSalesCurrent year turnover= $1,200,000$745,000Current year turnover= 1.61

Answer 62

9.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the ROI it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

9.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the ROI it will earn this year is 30.9%.

Explanation of Solution

Computation of return on investment

Return on investment=(Margin×Turnover)Return on investment= 19.2%×1.61Return on investment=30.9%

Answer 63

9.

To determine

If company purses the investment opportunity and otherwise performs the same as last year, give the ROI it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer 64

9.

Expert Solution

Answer to Problem 1TF15

If company purses the investment opportunity and otherwise performs the same as last year, the ROI it will earn this year is 30.9%.

Answer 65

9.

Expert Solution

Answer 66

9.

Expert Solution

Answer 67

Expert Solution

Answer 68

Explanation of Solution

Computation of return on investment

Return on investment=(Margin×Turnover)Return on investment= 19.2%×1.61Return on investment=30.9%

Answer 69

10.

To determine

Bonus is earned only when the ROI of current year exceeds from last year. Whether she will pursue the investment opportunity and will owner of the company allow pursuing the investments company.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

10.

Expert Solution

Answer to Problem 1TF15

If the return on investment is rejected then CEO of the company should provide preference to the new investment.

Explanation of Solution

Due to previous return on investment is 32% and with the new investment is 30.9%, so this new investment opportunity is not preferred. The company actually requires 15% return on investments but in normal the return on investment is 25%.

If the return on investment is rejected then CEO of the company should provide preference to the new investment.

Answer 70

10.

To determine

Bonus is earned only when the ROI of current year exceeds from last year. Whether she will pursue the investment opportunity and will owner of the company allow pursuing the investments company.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer 71

10.

Expert Solution

Answer to Problem 1TF15

If the return on investment is rejected then CEO of the company should provide preference to the new investment.

Answer 72

10.

Expert Solution

Answer 73

10.

Expert Solution

Answer 74

Expert Solution

Answer 75

Explanation of Solution

Due to previous return on investment is 32% and with the new investment is 30.9%, so this new investment opportunity is not preferred. The company actually requires 15% return on investments but in normal the return on investment is 25%.

If the return on investment is rejected then CEO of the company should provide preference to the new investment.

Answer 76

11.

To determine

Last year’s residual income.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

11.

Expert Solution

Answer to Problem 1TF15

Last year’s residual income is $106,205

Explanation of Solution

Computation of last year residual income

Last year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Last year residual income= ($200,000-($625,000×15%))Last year residual income=$106,250

Answer 77

11.

To determine

Last year’s residual income.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer 78

11.

Expert Solution

Answer to Problem 1TF15

Last year’s residual income is $106,205

Answer 79

11.

Expert Solution

Answer 80

11.

Expert Solution

Answer 81

Expert Solution

Answer 82

Explanation of Solution

Computation of last year residual income

Last year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Last year residual income= ($200,000-($625,000×15%))Last year residual income=$106,250

Answer 83

12.

To determine

Residual income of this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

12.

Expert Solution

Answer to Problem 1TF15

Residual income of this year’s investment opportunity will be $12,000

Explanation of Solution

Computation of current year residual income

Current year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Current year residual income= (30,000-($120,000×15%))Current year residual income=$12,000

Answer 84

12.

To determine

Residual income of this year’s investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer 85

12.

Expert Solution

Answer to Problem 1TF15

Residual income of this year’s investment opportunity will be $12,000

Answer 86

12.

Expert Solution

Answer 87

12.

Expert Solution

Answer 88

Expert Solution

Answer 89

Explanation of Solution

Computation of current year residual income

Current year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Current year residual income= (30,000-($120,000×15%))Current year residual income=$12,000

Answer 90

13.

To determine

If the company pursues the investments opportunity and otherwise performs the same, explain the residual income it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

13.

Expert Solution

Answer to Problem 1TF15

If the company pursues the investments opportunity and otherwise performs the same, the residual income it will earn this year is $118,250.

Explanation of Solution

Computation of current year residual income

Current year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Current year residual income= ($230,000-($745,000×15%))Current year residual income=$118,250

Answer 91

13.

To determine

If the company pursues the investments opportunity and otherwise performs the same, explain the residual income it will earn this year.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer 92

13.

Expert Solution

Answer to Problem 1TF15

If the company pursues the investments opportunity and otherwise performs the same, the residual income it will earn this year is $118,250.

Answer 93

13.

Expert Solution

Answer 94

13.

Expert Solution

Answer 95

Expert Solution

Answer 96

Explanation of Solution

Computation of current year residual income

Current year residual income= ( Net operatting income− ( Average operating assets× Return on investment ))Current year residual income= ($230,000-($745,000×15%))Current year residual income=$118,250

Answer 97

14.

To determine

Bonus is earned only when the ROI of current year exceeds from last year, whether she will pursue the investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

14.

Expert Solution

Answer to Problem 1TF15

Management will pursue for achieving the investment opportunity as it helps in increasing the residual income by $12,000.

Explanation of Solution

Bonus is earned only when the ROI of current year exceeds from last year. It will be pursued for achieving the investment opportunity as it helps in increasing the residual income by $12,000.

Answer 98

14.

To determine

Bonus is earned only when the ROI of current year exceeds from last year, whether she will pursue the investment opportunity.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer 99

14.

Expert Solution

Answer to Problem 1TF15

Management will pursue for achieving the investment opportunity as it helps in increasing the residual income by $12,000.

Answer 100

14.

Expert Solution

Answer 101

14.

Expert Solution

Answer 102

Expert Solution

Answer 103

Explanation of Solution

Bonus is earned only when the ROI of current year exceeds from last year. It will be pursued for achieving the investment opportunity as it helps in increasing the residual income by $12,000.

Answer 104

15.

To determine

If contribution margin ratio of investment opportunity was 50% instead of 60% and bonus is earned only when the ROI of current year exceeds from last year. Whether she will pursue the investment opportunity and will owner of the company want to pursue the investments company

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

15.

Expert Solution

Answer to Problem 1TF15

The difference in residual income for current year is of $8,000.

Explanation of Solution

Difference in residual income

Difference in residual income= ( Last year income- Current year residual income)Difference in residual income= $106,250-$98,250Difference in residual income=$8,000

Working notes:

Residual income

Residual income= ( Net operating income− ( Average operating assets× Return on investment ))Residual income=($210,000-($745,000×15%))Residual income=$98,250

Compute net operating income.

Particulars	Amount

Sales	$200,000
Less: Variable expenses ($200,000−$100,000)	$100,000
Contribution margin (50%×$200,000)	$100,000
Less: Fixed expenses	$90,000

Net operating income	$10,000

Answer 105

15.

To determine

If contribution margin ratio of investment opportunity was 50% instead of 60% and bonus is earned only when the ROI of current year exceeds from last year. Whether she will pursue the investment opportunity and will owner of the company want to pursue the investments company

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer 106

15.

Expert Solution

Answer to Problem 1TF15

The difference in residual income for current year is of $8,000.

Answer 107

15.

Expert Solution

Answer 108

15.

Expert Solution

Answer 109

Expert Solution

Answer 110

Explanation of Solution

Difference in residual income

Difference in residual income= ( Last year income- Current year residual income)Difference in residual income= $106,250-$98,250Difference in residual income=$8,000

Working notes:

Residual income

Residual income= ( Net operating income− ( Average operating assets× Return on investment ))Residual income=($210,000-($745,000×15%))Residual income=$98,250

Compute net operating income.

Particulars	Amount

Sales	$200,000
Less: Variable expenses ($200,000−$100,000)	$100,000
Contribution margin (50%×$200,000)	$100,000
Less: Fixed expenses	$90,000

Net operating income	$10,000

Answer 111

Ch. 11 - Prob. 11.1Q Ch. 11 - Prob. 11.2Q Ch. 11 - Prob. 11.3Q Ch. 11 - Prob. 11.4Q Ch. 11 - Prob. 11.5Q Ch. 11 - Prob. 11.6Q Ch. 11 - Prob. 11.7Q Ch. 11 - Prob. 11.8Q Ch. 11 - Prob. 11.9Q Ch. 11 - Prob. 11.10Q

Last year’s margin Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Last year’s margin Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer to Problem 1TF15

Explanation of Solution

Last year’s turnover Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer to Problem 1TF15

Explanation of Solution

Last year’s return on investment (ROI) Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer to Problem 1TF15

Explanation of Solution

Answer to Problem 1TF15

Explanation of Solution

Answer to Problem 1TF15

Explanation of Solution

Answer to Problem 1TF15

Explanation of Solution

Answer to Problem 1TF15

Explanation of Solution

Answer to Problem 1TF15

Explanation of Solution

Answer to Problem 1TF15

Explanation of Solution

Answer to Problem 1TF15

Explanation of Solution

Last year’s residual income. Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Answer to Problem 1TF15

Explanation of Solution

Answer to Problem 1TF15

Explanation of Solution

Answer to Problem 1TF15

Explanation of Solution

Answer to Problem 1TF15

Explanation of Solution

Answer to Problem 1TF15

Explanation of Solution

Want to see more full solutions like this?

Chapter 11 Solutions

Last year’s margin

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Last year’s turnover

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Last year’s return on investment (ROI)

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.

Last year’s residual income.

Introduction: Return on investments is difference between cost of investment and net profit. It is also performance measure which evaluates the efficiency of the investment made. It is even used in comparing the efficiency of difference between investments.