ROI and RI with manufacturing costs. Excellent Motor Company makes electric cars and has two products, the Simplegreen and the Excellentgreen. To produce the Simplegreen, Excellent Motor employed assets of $10,500,000 at the beginning of 2017 and $14,450,000 of assets at the end of 2017. Other costs to manufacture the Simplegreen include the following: Direct materialsSetupProduction$5,000 per unit$1,500 per setup-hour$ 415 per machine-hourGeneral administration and selling costs for Simplegreen total $7,820,000 in 2017. During the year, ExcellentMotor produced 11,000 Simplegreen cars using 6,000 setup-hours and 139,000 machine-hours. It sold thesecars for $12,000 each.1. Assuming that Excellent Motor defines investment as average assets during the period, what is thereturn on investment for the Simplegreen division?2. Calculate the residual income for Simplegreen if Excellent Motor has a required rate of return of 16%on investments.Required

Return on Investment would be measured by dividing the net income earned during the year in the…

Answered: Direct materials Setup Production…

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 8P: The production of a new product required Zion Manufacturing Co. to lease additional plant...

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ROI and RI with manufacturing costs. Excellent Motor Company makes electric cars and has two products, the Simplegreen and the Excellentgreen. To produce the Simplegreen, Excellent Motor employed assets of $10,500,000 at the beginning of 2017 and $14,450,000 of assets at the end of 2017. Other costs to manufacture the Simplegreen include the following:

Direct materials
Setup
Production
$5,000 per unit
$1,500 per setup-hour
$ 415 per machine-hour
General administration and selling costs for Simplegreen total $7,820,000 in 2017. During the year, Excellent
Motor produced 11,000 Simplegreen cars using 6,000 setup-hours and 139,000 machine-hours. It sold these
cars for $12,000 each.
1. Assuming that Excellent Motor defines investment as average assets during the period, what is the
return on investment for the Simplegreen division?
2. Calculate the residual income for Simplegreen if Excellent Motor has a required rate of return of 16%
on investments.
Required

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