Dickonson Products is a division of a major corporation. The following data are for the last year of operations: Sales. Net operating income. $16,640,000 $399,360 $4,000,000 18% Average operating assets The company's minimum required rate of return. The division's residual income is closest to: Select one: a. $(320,640) b. $1,119,360 c. $399,360 d. $(2,595,840)
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- Residual income The Commercial Division of Galena Company has operating income of 12,680,000 and assets of 74,500,000. The minimum acceptable return on assets is 12%. What is the residual income for the division?Forchen, Inc., provided the following information for two of its divisions for last year: Required: 1. For the Small Appliances Division, calculate: a. Average operating assets b. Margin c. Turnover d. Return on investment (ROI) 2. For the Cleaning Products Division, calculate: a. Average operating assets b. Margin c. Turnover d. Return on investment (ROI) 3. What if operating income for the Small Appliances Division was 2,000,000? How would that affect average operating assets? Margin? Turnover? ROI? Calculate any changed ratios (round to four significant digits).During the current year, Sokowski Manufacturing earned income of $350,000 from total sales of $5,500,000 and average capital assets of $12,000,000. A. Based on this information, calculate asset turnover. B. Using the sales margin from the previous exercise, what is the total ROI for the company during the current year?
- 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).The condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as follows (assuming no support department allocations): 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 143,750,000 of assets have been invested in the Consumer Products Division. b. If expenses could be reduced by 3,450,000 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on investment for the Consumer Products Division?Xenold, Inc., manufactures and sells cooktops and ovens through three divisions: Home, Restaurant, and Specialty. Each division is evaluated as a profit center. Data for each division for last year are as follows (numbers in thousands): The income tax rate for Xenold, Inc., is 40 percent. Xenold, Inc., has two sources of financing: bonds paying 5 percent interest, which account for 25 percent of total investment, and equity accounting for the remaining 75 percent of total investment. Xenold, Inc., has been in business for over 15 years and is considered a relatively stable stock, despite its link to the cyclical construction industry. As a result, Xenold stock has an opportunity cost of 5 percent over the 4 percent long-term government bond rate. Xenolds total capital employed is 5.04 million (2,600,000 for the Home Division, 1,700,000 for the Restaurant Division, and the remainder for the Specialty Division). Required: 1. Prepare a segmented income statement for Xenold, Inc., for last year. 2. Calculate Xenolds weighted average cost of capital. (Round to four significant digits.) 3. Calculate EVA for each division and for Xenold, Inc. 4. Comment on the performance of each of the divisions.
- Use the following information for Exercises 11-31 and 11-32: Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last years results: Washingtons actual cost of capital was 12%. Exercise 11-32 Residual Income Refer to the information for Washington Company above. In addition, Washington Companys top management has set a minimum acceptable rate of return equal to 8%. Required: 1. Calculate the residual income for the Adams Division. 2. Calculate the residual income for the Jefferson Division.Macon Mills is a division of Bolin Products. Inc. During the most recent year, Macon had a net income of $40 million. Included in the income was interest expense of $2,800,000. The companys tax rate was 40%. Total assets were $470 million, current liabilities were $104,000,000, and $72,000,000 of the current liabilities are noninterest bearing. What are the invested capital and ROI for Macon?During the current year, Plainfield Manufacturing earned income of $845,000 from total sales of $9,350,000 and average capital assets of $13,500,000. Using the sales margin from the previous exercise, what is the total ROI for the company during the current year?
- During the current year, Sokowski Manufacturing earned income of $350,000 from total sales of $5,500,000 and average capital assets of $12,000, 000. What is the sales margin?During the current year. Plainfield Manufacturing earned income of $845,000 from total sales of $9,350,000 and average capital assets of $13,500,000. What is the sales margin?Last Resort Industries Inc. is a privately held diversified company with five separate divisions organized as investment centers. A condensed income statement for the Specialty Products Division for the past year, assuming no support department allocations, along with asset information is as follows: The manager of the Specialty Products Division was recently presented with the opportunity to add an additional product line, which would require invested assets of 14,400,000. A projected income statement for the new product line is as follows: The Specialty Products Division currently has 27,000,000 in invested assets, and Last Resort Industries Inc.s overall return on investment, including all divisions, is 10%. Each division manager is evaluated on the basis of divisional return on investment. A bonus is paid, in 8,000 increments, for each whole percentage point that the divisions return on investment exceeds the company average. The president is concerned that the manager of the Specialty Products Division rejected the addition of the new product line, even though all estimates indicated that the product line would be profitable and would increase overall company income. You have been asked to analyze the possible reasons the Specialty Products Division manager rejected the new product line. a. Determine the return on investment for the Specialty Products Division for the past year. b. Determine the Specialty Products Division managers bonus for the past year. c. Determine the estimated return on investment for the new product line. Round percentages to one decimal place and the investment turnover to two decimal places. d. Why might the manager of the Specialty Products Division decide to reject the new product line? Support your answer by determining the projected return on investment for 20Y6, assuming that the new product line was launched in the Specialty Products Division and 20Y6 actual operating results were similar to those of 20Y5. e. Suggest an alternative performance measure for motivating division managers to accept new investment opportunities that would increase the overall company income and return on investment.