1.
The margin, turnover, and return on investment (ROI) of the Division.
2.
Return on Investment or asset: It establishes the relationship between the net income and the assets or capital employed. The ratio is used to measure the overall performance of an organization by looking at how efficiently an organization uses its resources.
The margin, turnover, and return on investment (ROI) of the new product line.
3.
Return on Investment or asset: It establishes the relationship between the net income and the assets or capital employed. The ratio is used to measure the overall performance of an organization by looking at how efficiently an organization uses its resources.
The margin, turnover, and return on investment (ROI) for the next year.
4.
Return on Investment or asset: It establishes the relationship between the net income and the assets or capital employed. The ratio is used to measure the overall performance of an organization by looking at how efficiently an organization uses its resources.
Whether the new project line should be accepted or rejected.
5.
Return on Investment or asset: It establishes the relationship between the net income and the assets or capital employed. The ratio is used to measure the overall performance of an organization by looking at how efficiently an organization uses its resources.
The reason why Company D wants Division O to accept this investment opportunity.
6.
Residual income: A business performance measurement that takes into account the minimum required return on the asset employed is a residual income, which the company expects from the asset in which the investment has been made. In the other words, residual income is the amount of excess earnings earned over and above the minimum required return of the capital invested.
a. The residual income of the current year.
b. The residual income of the new product line.
c. The residual income for the next year.
d. The new product line will probably accept or reject if performance is being measured by Residual Income.
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MANAGERIAL ACCOUNTING (LL) BUNDLE
- *COULD YOU ANSWER PARTS 6A-6C* “I know headquarters wants us to add that new product line,” said Dell Havasi, manager of Billings Company’s Office Products Division. “But I want to see the numbers before I make any move. Our division’s return on investment (ROI) has led the company for three years, and I don’t want any letdown.” Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis of ROI, with year-end bonuses given to the divisional managers who have the highest ROIs. Operating results for the company’s Office Products Division for this year are given below: Sales $ 22,700,000 Variable expenses 14,363,700 Contribution margin 8,336,300 Fixed expenses 6,175,000 Net operating income $ 2,161,300 Divisional average operating assets $ 5,675,000 The company had an overall return on investment (ROI) of 16.00% this year (considering all divisions). Next year the Office Products Division…arrow_forwardExercise 10-9 (Static) Return on Investment (ROI) and Residual Income Relations [LO10-1, LO10-2] A family friend has asked your help in analyzing the operations of three anonymous companies operating in the same service sector industry. Supply the missing data in the table below: (Loss amounts should be indicated by a minus sign.) Sales Net operating income Average operating assets Return on investment (ROI) Minimum required rate of return: Percentage Dollar amount Residual income Company A $ 9,000,000 $ 3,000,000 18 % 16 % Company B $ 7,000,000 $ 280,000 $ 14 % 320,000 % $ Company C 4,500,000 $ 1,800,000 $ % 15 % 90,000arrow_forwardExercise 11-27 (Algo) Product-Line Profitability Analysis [LO 11-5] Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10 percent next year, but the firm's cost structure will remain the same. Sales Variable costs: Cost of goods sold Selling & administrative Contribution margin Fixed expenses: Fixed corporate costs Fixed selling and administrative Total fixed expenses Operating income 1. 2 3 T-1 $ 270,000 Required % increase in…arrow_forward
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