Return on investment (ROI): Return on investment is a profitability ratio that represents the percentage return on the investment made. It is calculated by dividing the Net Income by the Average total assets. The formulas to calculate the ROI are as follows: R O I = O p e r a t i n g I n c o m e A v e r a g e t o t a l a s s e t s R O I ( E x p a n d e d ) = O p e r a t i n g I n c o m e S a l e s × S a l e s A v e r a g e t o t a l a s s e t s Or R O I = P r o f i t M a r g i n R a t i o × A s s e t T u r n o v e r r a t i o To Calculate: The estimated return on investment for the new product line

BuyFind

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
Publisher: Cengage Learning
ISBN: 9781305961883
BuyFind

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
Publisher: Cengage Learning
ISBN: 9781305961883

Solutions

Chapter
Section
Chapter 14, Problem 14.5.3C
Textbook Problem

Chapter 14, Problem 14.5.3C,  , example  1Chapter 14, Problem 14.5.3C,  , example  2Chapter 14, Problem 14.5.3C,  , example  3

Expert Solution
To determine

Concept Introduction:

Return on investment (ROI):

Return on investment is a profitability ratio that represents the percentage return on the investment made. It is calculated by dividing the Net Income by the Average total assets. The formulas to calculate the ROI are as follows:

  ROI = Operating IncomeAverage total assets 

  ROI (Expanded)= Operating IncomeSales ×SalesAverage total assets

Or

  ROI = Profit Margin Ratio ×Asset Turnover ratio

To Calculate:

The estimated return on investment for the new product line

Explanation of Solution

The estimated return on investment for the new product line is calculated as follows:

    Operating Income (A) $ 810,000

Expert Solution

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Chapter 14 Solutions

Survey of Accounting (Accounting I)
Ch. 14 - What is the major shortcoming of using operating...Ch. 14 - Why should the factors under the control of the...Ch. 14 - In a decentralized company in which the divisions...Ch. 14 - How does using the return on investment facilitate...Ch. 14 - The returns on investment for Shear Co.'s three...Ch. 14 - What is the objective of transfer pricing?Ch. 14 - When is the negotiated price approach preferred...Ch. 14 - Why would standard cost be a more appropriate...Ch. 14 - When using the negotiated price approach to...Ch. 14 - Budget performance reports for cost centers...Ch. 14 - Divisional income statements The following data...Ch. 14 - Service department charges and activity bases For...Ch. 14 - El 4-4 Activity bases for service department...Ch. 14 - Service department charges In divisional income...Ch. 14 - Service department charges and activity bases...Ch. 14 - Divisional income statements with service...Ch. 14 - Corrections to service department charges Panda...Ch. 14 - Profit center responsibility reporting On-Demand...Ch. 14 - Return on investment The operating income and the...Ch. 14 - Residual income Based on the data in Exercise...Ch. 14 - Determining missing items in return on investment...Ch. 14 - Profit margin, investment turnover, and return on...Ch. 14 - Return on investment The Walt Disney Company has...Ch. 14 - Determining missing items in return on investment...Ch. 14 - Determining missing items from computations Data...Ch. 14 - Transfer pricing Wiring used by the Appliance...Ch. 14 - Transfer pricing Based on Kaufman Manufacturing's...Ch. 14 - Budget performance report for a cost center Sneed...Ch. 14 - Budget performance report for a cost center Sneed...Ch. 14 - Profit center responsibility reporting A-One...Ch. 14 - Profit center responsibility reporting A-One...Ch. 14 - Profit center responsibility reporting A-One...Ch. 14 - Divisional income statements and return on...Ch. 14 - Divisional income statements and return on...Ch. 14 - Divisional income statements and return on...Ch. 14 - Effect of proposals on divisional performance A...Ch. 14 - Effect of proposals on divisional performance A...Ch. 14 - Effect of proposals on divisional performance A...Ch. 14 - Effect of proposals on divisional performance A...Ch. 14 - Effect of proposals on divisional performance A...Ch. 14 - Divisional performance analysis and evaluation The...Ch. 14 - Divisional performance analysis and evaluation The...Ch. 14 - Divisional performance analysis and evaluation The...Ch. 14 - Divisional performance analysis and evaluation The...Ch. 14 - Prob. 14.6.1PCh. 14 - Prob. 14.6.2PCh. 14 - Prob. 14.6.3PCh. 14 - Prob. 14.6.4PCh. 14 - Prob. 14.6.5PCh. 14 - Balanced scorecard American Express Company (AXP)...Ch. 14 - Balanced scorecard Several years ago. United...Ch. 14 - Balanced scorecard Delta Air Lines, Inc. (DAL)...Ch. 14 - Balanced scorecard Costco Wholesale Corporation...Ch. 14 - Balanced scorecard Divide responsibilities between...Ch. 14 - Ethics and professional conduct in business Sisel...Ch. 14 - Service department charges The Customer Service...Ch. 14 - Evaluating divisional performance The three...Ch. 14 - Evaluating divisional performance The three...Ch. 14 - Evaluating divisional performance The three...Ch. 14 - Evaluating divisional performance The three...Ch. 14 - Prob. 14.4.1CCh. 14 - Prob. 14.4.2CCh. 14 - Prob. 14.4.3CCh. 14 - Prob. 14.4.4CCh. 14 - Prob. 14.5.1CCh. 14 - Prob. 14.5.2CCh. 14 - Prob. 14.5.3CCh. 14 - Prob. 14.5.4CCh. 14 - Prob. 14.5.5CCh. 14 - Prob. 14.5.6C

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