Jasper Corporation is organized in three separate divisions. The three divisional managers are evaluated at year-end, and bonuses are awarded based on ROI. Last year, the overall company produced a 12% return on its investment. Managers of Jasper's Carbon Division recently studied an investment opportunity that would assist in the division's future growth. Relevant data follow. Carbon Division Investment Opportunity P12,800,000 P 4,200,000 Operating income Invested capital 80,000,000 30,000,000

Jasper Corporation is organized in three separate divisions. The three divisional managers are evaluated at year-end, and bonuses are awarded based on ROI. Last year, the overall company produced a 12% return on its investment. Managers of Jasper's Carbon Division recently studied an investment opportunity that would assist in the division's future growth. Relevant data follow. Carbon Division Investment Opportunity P12,800,000 P 4,200,000 Operating income Invested capital 80,000,000 30,000,000

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter13: The Balanced Scorecard: Strategic-based Control

Section: Chapter Questions

Problem 14E

See similar textbooks

Similar questions

Q1 Hope and Co. is a multi-divisional marketing firm. The performance of divisions is evaluated using financial metrics such as ROI, Residual Income and EVA. For the year ended June 30, 2020, Hope's CEO received the following information about the performance of the sports marketing division: Sales Revenues $950,000 Operating Income $275,000 Total Assets $1,750,000 Current Liabilities $325,000 Debt (interest rate: 4%) $450,000 Common equity (book value) $550,000 For divisional performance evaluation Hope defined investment as total assets and income as operating income i.e. income before interest and taxes. Hope pays a flat rate of 20% in taxes on income. (a) What was the Sports Marketing division's ROI for the year? (2 decimal places)
Q1 Hope and Co. is a multi-divisional marketing firm. The performance of divisions is evaluated using financial metrics such as ROI, Residual Income and EVA. For the year ended June 30, 2020, Hope's CEO received the following information about the performance of the sports marketing division: Sales Revenues $950,000 Operating Income $275,000 Total Assets $1,750,000 Current Liabilities $325,000 Debt (interest rate: 4%) $450,000 Common equity (book value) $550,000 For divisional performance evaluation Hope defined investment as total assets and income as operating income i.e. income before interest and taxes. Hope pays a flat rate of 20% in taxes on income. (a) What was the Sports Marketing division's ROI for the year? (2 decimal places) (b) Based on Hope's required rate of return of 6% what was the residual income for the 2020 year? (2 decimal places) (c) Hope's debt trades at book value while its equity has a market value…
Subject: accounting ABC Corporation has divisions. One of the division is currently, making a profit of OMR 82,000 per year. On investment of OMR 500,000 and has a target return of 15%. The manager of a company is considering a new investment, which will require additional investment of OMR 100,000 and will generate additional profit of OMR 17,000 per year. Calculate whether or not the new investment is attractive to the company as a whole. Calculate the ROI of the division, with and without new investment and hence determine whether or not manager would decide to accept the new investment
1. Calculate return on investment (ROI) and residual income for each division for last year. 2. Recalculate ROI and residual income for the division for each independent situation that follows: a. Operating income increases by 10 percent. b. Operating income decreases by 11 percent. c. The company invests $245,000 in each division, an amount that generates $119,000 additional income per division. d. Coolbrook changes its hurdle rate to 4.76 percent.
Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of capital of 15 percent. Selected financial information (in thousands of dollars) for the first year of business follows: East West Sales revenue $ 1,000 $ 5,000 Income 200 390 Investment (beginning of year) 2,000 3,000 Current liabilities (beginning of year) 200 200 R&D expendituresa 500 400 aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming BMI uses return on investment (ROI).
ROI and Residual Income; Investment Evaluation Income: $150,000 Current residual income of the Northeast Division: $148,000 Megatronics Corporation, a massive retailer of electronic products, is organized in four separate divisions. The four divisional managers are evaluated at year-end, and bonuses are awarded based on ROI. Last year, the company produced a 13 percent return on its investment. During the past week, management of the company’s Northeast Division was approached about the possibility of buying a competitor that had decided to redirect its retail activities. (If the competitor is acquired, it will be acquired at its book value.) The data that follow relate to recent performance of the Northeast Division and the competitor Northeast Division Competitor Sales ....................................................................................................... $8,400,000 $5,200,000 Variable costs…
ROI and Residual Income; Investment Evaluation Income: $150,000 Current residual income of the Northeast Division: $148,000 Megatronics Corporation, a massive retailer of electronic products, is organized in four separate divisions. The four divisional managers are evaluated at year-end, and bonuses are awarded based on ROI. Last year, the company produced a 13 percent return on its investment. During the past week, management of the company’s Northeast Division was approached about the possibility of buying a competitor that had decided to redirect its retail activities. (If the competitor is acquired, it will be acquired at its book value.) The data that follow relate to recent performance of the Northeast Division and the competitor Northeast Division Competitor Sales ....................................................................................................... $8,400,000 $5,200,000 Variable costs…
Chick-Fil-A are the Lord’s Calories (CLC) has the following divisions within their company that achieved the reported ROIs for the previous year: Division ROI A 15% B 20% C 18% CLC has been approached with a $350,000 investment opportunity. Which division will AFA choose to invest in, and how much operating income will be generated from the investment? A. AFA will invest in Division A; the investment will earn operating income of $52,000 B. AFA will invest in Division C; the investment will earn operating income of $63,000 C. AFA will invest in Division B; the investment will earn operating income of $70,000 D. AFA will invest in Division A; the investment will earn operating income of $63,000
#1 The company had an overall return on investment (ROI) of 15% last year (considering all divisions). The Office Products Division has an opportunity to add a new product line that would require an additional investment in operating assets of $1,000,000. The cost and revenue characteristics of the new product line per year would be: This Year New Line Next Year New product line Info Company Oveall Info: Sales $10,000,000.00 $ 2,000,000.00 $12,000,000.00 Sales $2,000,000.00 ROI 15% Variable expenses $6,000,000.00 $7,200,000.00 Variable expenses 60% of sales Invest in operating $1,000,000.00 Contribution margin $4,000,000.00 $4,800,000.00 Fixed expenses $640,000.00 Fixed expenses $3,200,000.00 $ 640,000.00 $3,840,000.00 Net Operating Income Net operating income $800,000.00 $960,000.00 Divisional operating assets $4,000,000.00 $ 1,000,000.00 $5,000,000.00 Margin…
The Electronics Division of Anton Company reports the following results for the current year: Revenues $ 445,000 Operating expenses $ 400,000 Operating income $ 45,000 Operating assets $ 550,000 Anton Company has set a target return on investment (ROI) of 12% for the Electronics Division. The Electronic Division's return on investment is: Multiple Choice 11.25%. 8.18%. 10.11%. 12.00%.
(J) Please answer Asap.... Glory limited has two divisions x and y. each with its own cost and revenue streams. each division is managed by a divisional manager who has the power to make all investment decisions within the division. the cost of capital for both division is 15 percent. historically, investment decisions have been made by calculating the return on investment (ROI) of any opportunities and presently the return on investment of each division is 18 percent A recently appointed manager for division x strongly feels that using residual income to make investment decisions would result in better goal congruence throughout the organization. Each division is currently considering the following separate investments: capital required for the investment division x, 88.2m and division y, 46m revenue generated from investment: division x, 46.4m and division y, 28.1m net profit margin: division x, 36% and division y, 35% required:determine both the…
Payback, NPV, Managerial Incentives, Ethical Behavior Kent Tessman, manager of a Dairy Products Division, was pleased with his division's performance over the past three years. Each year, divisional profits had increased, and he had earned a sizable bonus. (Bonuses are a linear function of the division's reported income.) He had also received considerable attention from higher management. A vice president had told him in confidence that if his performance over the next three years matched his first three, he would be promoted to higher management. Determined to fulfill these expectations, Kent made sure that he personally reviewed every capital budget request. He wanted to be certain that any funds invested would provide good, solid returns. (The division's cost of capital is 10 percent.) At the moment, he is reviewing two independent requests. Proposal A involves automating a manufacturing operation that is currently labor intensive. Proposal B centers on developing and marketing a…