Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN: 9781337115773

Author: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher: Cengage Learning

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Textbook Question

Chapter 11, Problem 27E

Margin, Turnover, Return on Investment, Average Operating Assets

Elway Company provided the following income statement for the last year:

Chapter 11, Problem 27E, Margin, Turnover, Return on Investment, Average Operating Assets Elway Company provided the

At the beginning of last year, Elway had $28,300,000 in operating assets. At the end of the year, Elway had $23,700,000 in operating assets.

Required:

1. Compute average operating assets.
2. Compute the margin and turnover ratios for last year. (Note: Round the answer for margin ratio to two decimal places.)
3. Compute ROI. (Note: Round answer to two decimal places.)
4. CONCEPTUAL CONNECTION Briefly explain the meaning of ROI.
5. CONCEPTUAL CONNECTION Comment on why the ROI for Elway Company is relatively high (as compared to the lower ROI of a typical manufacturing company).

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Chapter 11, Problem 26E

Chapter 11, Problem 28E

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Chapter 11 Solutions

Managerial Accounting: The Cornerstone of Business Decision-Making

Ch. 11 - Discuss the differences between centralized and...Ch. 11 - Prob. 2DQ Ch. 11 - Explain why firms choose to decentralize.Ch. 11 - What are margin and turnover? Explain how these...Ch. 11 - What are the three benefits of ROI? Explain how...Ch. 11 - What is residual income? What is EVA? How does EVA...Ch. 11 - Can residual income or EVA ever be negative? What...Ch. 11 - What is transfer price?Ch. 11 - Prob. 9DQ Ch. 11 - (Appendix 11A) What is the Balanced Scorecard?

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Solution Summary: The author calculates the average operating income by adding the beginning and ending assets and dividing the result by 2. The margin and turnover ratios are 15% and 40.

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Chapter 11 Solutions