Company B has the following information for the year 20XO: Sold units Sales price per unit Unit variable cost Total fixed cost (interest cost of $160,000 included) Operating assets at the beginning of the year Operating assets at the end of the year Requirements: 50,000 $160 $96 1,360,000 $18,000,000 $22,000,000 a. Calculate the ROI for the year. b. Given that the minimum required rate was 8% per year, calculate the RI for the year. c. In 20X1, an improvement is taken in order to save the direct material cost. A saving of $200,000 is achieved. With the other information remains unchanged, calculate the ROI of 20X1.

Company B has the following information for the year 20XO: Sold units Sales price per unit Unit variable cost Total fixed cost (interest cost of $160,000 included) Operating assets at the beginning of the year Operating assets at the end of the year Requirements: 50,000 $160 $96 1,360,000 $18,000,000 $22,000,000 a. Calculate the ROI for the year. b. Given that the minimum required rate was 8% per year, calculate the RI for the year. c. In 20X1, an improvement is taken in order to save the direct material cost. A saving of $200,000 is achieved. With the other information remains unchanged, calculate the ROI of 20X1.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

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

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

Chapter11: Performance Evaluation And Decentralization

Section: Chapter Questions

Problem 21BEB

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Margin, Turnover, Return on Investment, Average Operating Assets Elway Company provided the following income statement for the last year: 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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