Estes Company has assembled the following data for its divisions for the past year: Average operating assets Sales.............. Net operating income Turnover Division A Division B $500,000 ? ? $520,000 $100,000 $20,300 1.25 4 ? 3.9% Minimum required rate of return 14% ? ? $6,000 Margin.... Residual income Division B's average operating assets is: $81,200 $2,080,000 $1,333,333 $130,000

Estes Company has assembled the following data for its divisions for the past year: Average operating assets Sales.............. Net operating income Turnover Division A Division B $500,000 ? ? $520,000 $100,000 $20,300 1.25 4 ? 3.9% Minimum required rate of return 14% ? ? $6,000 Margin.... Residual income Division B's average operating assets is: $81,200 $2,080,000 $1,333,333 $130,000

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 11E: The operating income and the amount of invested assets in each division of Conley Industries are as...

See similar textbooks

Similar questions

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).
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?
Coolbrook Company has the following information available for the past year: River Stream Division Division Sales revenue $1,200,000 900,000 $1,800,000 1,300,000 Cost of goods sold and operating expenses Net operating income $ 300,000 $ 500,000 Average invested assets $1,200,000 $1,800,000 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. b. Operating income decreases 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. Complete this question by entering your answers in the tabs below. Req 1 Reg 2A Req 28 Reg 20 Reg 2D Calculate return on investment (ROI) and residual income for each division for last year. (Enter your ROI…
Mitsu Division has the following results for the year: Revenues $1,080,000Variable expenses 440,000Fixed expenses 400,000Total divisional assets are $1,600,000. The company's minimum required rate of return is 14 percent. What is the residual income for Scottso?
Durand Division has the following results for the year: Revenues $470,000Net income 130,000Total divisional assets are $625,000. The company's minimum required rate of return is 12 percent. Residual income for Durand is?
Kyle Corporation provides the following information for the Product Division and Service Division for the year. Product Division Service Division 420,000 $ 650,000 195,000 245,000 640,000 610,000 14.0% 14.0% Net sales Operating income Average total assets Target rate of return $ Requirement 1. Calculate the return on investment for each division. (Enter answers as a percent rounded to the nearest hundredth percent, X.XX%) The return on investment for the Product Division is The return on investment for the Service Division is Requirement 2. Which division has the highest ROI? % % Requirement 3. Calculate the residual income for each division. (Round answers to the nearest whole dollar.) The residual income for the Product Division is The residual income for the Service Division is Requirement 4. Which division has the highest residual income?
Consider the following data from two divisions of a company, P and Q: Divisional P Q Sales $ 2,000,000 $ 1,100,000 Operating Income $ 800,000 $ 660,000 Investment $ 3,200,000 $ 1,760,000 If the minimum rate of return is 9%, what is Division P's residual income (RI)?
Ryan Division has the following results for the year: Revenues $470,000Net income 130,000Total divisional assets are $625,000. The company's minimum required rate of return is 12 percent. What is the return on sales for Durand? Refer to Ryan Division, Residual income is?
Dickonson Products is a division of a major corporation. The following data are for the last year of operations: Sales... $16,640,000 $399,360 Net operating income Average operating assets $4,000,000 The company's minimum required rate of return. 18% The division's residual income is closest to: Select one: a. $(320,640) b. $1,119,360 c. $399,360 d. $(2,595,840)
Hardin Company is a division of a major corporation. The following data are for the latest year of operations: Sales $ 19,600,000 Net operating income $ 470,400 Average operating assets $ 5,000,000 The company's minimum required rate of return 10 % Required: What is the division's residual income?
Coolbrook Company has the following information available for the past year: River Division Stream Division Sales revenue $ 1,209,000 $ 1,810,000 Cost of goods sold and operating expenses 900,000 1,286,000 Net operating income $ 309,000 $ 524,000 Average invested assets $ 1,200,000 $ 1,460,000 The company’s hurdle rate is 6.26 percent. Required: 1. Calculate return on investment (ROI) and residual income for each division for last year. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.)) river steam ROI % % Residual income (loss) 2. Recalculate ROI and residual income for the division for each independent situation that follows: Operating income increases by 11 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Loss…
The sales, operating income, and invested assets for each division of Salem Company are as follows: Sales OperatingIncome InvestedAssets Division C $4,000,000 $410,000 $3,500,000 Division D 3,500,000 600,000 4,000,000 Division E 2,250,000 780,000 7,000,000 Management has established a minimum rate of return for invested assets of 11%. a. Determine the residual income for each division. Residual Income Division C $fill in the blank 1 Division D $fill in the blank 2 Division E $fill in the blank 3 b. Based on residual income, which division is the most profitable?