Concord, Inc. reports the following financial information for its sports clothing segment. Average operating assets Controllable margin Minimum rate of return $2,989,000 $717,360 9% Compute the return on investment and the residual income for the segment. Return on investment Residual income $ SA %
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- The income statement comparison for Forklift Material Handling shows the income statement for the current and prior year. A. Determine the operating income (loss) (dollars) for each year. B. Determine the operating income (percentage) for each year. C. The company made a strategic decision to invest in additional assets in the current year. These amounts are provided. Using the total assets amounts as the investment base, calculate the return on investment. Was the decision to invest additional assets in the company successful? Explain. D. Assuming an 8% cost of capital, calculate the residual income for each year. Explain how this compares to your findings in part C.The Break Division of Zoe motors Company had the following financial data for the year: Assets available for use P 1,000,000 BV P1,500,000 MV Residual income P 100,000 Return on investment 15% A. What was the Break Division’s segment income? B. If the manager of the Break Division is evaluated based on return on investment, how much would she willing to pay for an investment that promise to increase net segment income by P50,000?The Magazine Division of XYZ publication Company had the following financial data for the year: Assets available for use P 1,000,000 BV P1,500,000 MV Residual income P 100,000 Return on investment 15% A. What was the Magazine Division’s segment income? B. If the manager of the Magazine Division is evaluated based on return on investment, how much would she willing to pay for an investment that promise to increase net segment income by P50,000?
- Presented below is information related to the Southern Division of Lumber, Inc. Contribution margin$1,235,600Controllable margin$931,270Average operating assets$4,049,000Minimum rate of return16% Compute the Southern Division’s return on investment and residual income. Return on investment%Residual income$Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center). Investment Center Sales Income AverageInvested Assets Electronics $ 40,000,000 $ 2,880,000 $ 16,000,000 Sporting goods 20,000,000 2,040,000 12,000,000 Exercise 22-10 Computing return on investment and residual income; investing decision LO A1 1. Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company?2. Assume a target income level of 12% of average invested assets. Compute residual income for each department. Which department generated the most residual income for the company?3. Assume the Electronics department is presented with a new investment opportunity that will yield a 15% return on investment. Should the new investment opportunity be accepted?Calculate the return on investment (as a %) for the given company. (Round your answer to the nearest tenth of a percent.) Company Net Sales Cost ofGoods Sold GrossProfit OperatingExpenses a countertop installer $759,500 $486,560 $272,940 $176,410 Net Profit Gross ProfitMargin (%) Net ProfitMargin (%) Owner's Equity Return onInvestment (%) $96,530 35.9% 12.7% $425,210 %
- Given the following data: Average operating assets $ 1,116,000 Total liabilities $ 167,400 Sales $ 837,000 Contribution margin $ 502,200 Net operating income $ 167,400 Return on investment (ROI) is: Multiple Choice 20.0% 15.0% 60.0% 45.0%Profit Margin, Investment Turnover, and return on investment The condensed income statement for the Consumer Products Division of Fargo Industries Inc. is as follows (assuming no service department charges): Sales $540,000 Cost of goods sold 243,000 Gross profit $297,000 Administrative expenses 135,000 Income from operations $162,000 The manager of the Consumer Products Division is considering ways to increase the return on investment. a. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that $1,350,000 of assets have been invested in the Consumer Products Division. Round the investment turnover to one decimal place. Profit margin fill in the blank 1 % Investment turnover fill in the blank 2 Rate of return on investment fill in the blank 3 % b. If expenses could be reduced by $27,000 without decreasing sales, what would be the impact on the…Profit Margin, Investment Turnover, and return on investment The condensed income statement for the Consumer Products Division of Fargo Industries Inc. is as follows (assuming no service department charges): Sales $1,026,000 Cost of goods sold 461,700 Gross profit $564,300 Administrative expenses 205,200 Income from operations $359,100 The manager of the Consumer Products Division is considering ways to increase the return on investment. a. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that $1,710,000 of assets have been invested in the Consumer Products Division. Round the investment turnover to one decimal place. Profit margin % Investment turnover Rate of return on investment % b. If expenses could be reduced by $51,300 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on…
- The following selected data pertain to the belt division of Allen Corp. for last year: * Sales $2,000,000 * Average operating assets $500,000 * Net operating income $300,000 * Turnover 4.0 * Minimum required return 18% How much is the return on investment? 1) 60% 2) 33% 3) 18% 4) 15%Data about Les department of Les miserable’s company for the year are as follows: A. sales amounted to 880,000 at 12% margin B. return on investment was 20% C. minimum required rate of return was 15% The residual income of les department must be: A. 26,400 B. 42,240 C. 79,200 D.105,600Solano Company has sales of $620,000, cost of goods sold of $430,000, other operating expenses of $51,000, average invested assets of $1,900,000, and a hurdle rate of 10 percent.Required:1. Determine Solano’s return on investment (ROI), investment turnover, profit margin, and residual income.2. Several possible changes that Solano could face in the upcoming year follow. Determine each scenario’s impact on Solano’s ROI and residual income. (Note: Treat each scenario independently.)a. Company sales and cost of goods sold increase by 30 percent.b. Operating expenses decrease by $15,500.c. Operating expenses increase by 10 percent.