Coolbrook Company has the following information available for the past year: River Stream Division Division Sales revenue $1,200,000 $1,800,000 Cost of goods sold and operating expenses 1,300,000 $ 300,000 $ 500,000 $1,200,000 $1,800,000 900, 000 Net operating income Average invested assets The company's hurdle rate is 6 percent. Required: 1. Calculate return on investment (ROI) and residual income for each division for last year. 2. Recalculate ROI and residual income for each division for each independent situation that follows: a. Operating income increases by 10 percent. c. The company invests $250,000 in each division, an amount that generates $100,000 additional income per division. d. Coolbrook changes its hurdle rate to 10 percent.
Coolbrook Company has the following information available for the past year: River Stream Division Division Sales revenue $1,200,000 $1,800,000 Cost of goods sold and operating expenses 1,300,000 $ 300,000 $ 500,000 $1,200,000 $1,800,000 900, 000 Net operating income Average invested assets The company's hurdle rate is 6 percent. Required: 1. Calculate return on investment (ROI) and residual income for each division for last year. 2. Recalculate ROI and residual income for each division for each independent situation that follows: a. Operating income increases by 10 percent. c. The company invests $250,000 in each division, an amount that generates $100,000 additional income per division. d. Coolbrook changes its hurdle rate to 10 percent.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing
Section: Chapter Questions
Problem 1CE: Forchen, Inc., provided the following information for two of its divisions for last year: Required:...
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