Prepare a vertical analysis of the sales as a percent of total sales for the three segments, and identify the segment which has highest percentage of total sales.

Question

Eastlawn Travel has two operating divisions, Tours and Resorts. The two divisions meet the requirements for segment disclosures. Before transactions between the two divisions are considered, revenues and costs are as follows: Revenues Costs Tours $ 35,200,000 19,800,000 The two divisions have an arrangement by which Resorts gives coupons redeemable for tours and Tours gives discount coupons good for stays at a resort. The value of the coupons for the tours redeemed during the past year totaled $5.3 million. The discount coupons redeemed at the resorts totaled $2.2 million. As of the end of the year, all coupons for the current year expired. Tours Resorts Resorts $ 24,200,000 17,600,000 Required: What are the operating profits for each division considering the effects of the costs arising from the joint agreement? Note: Enter your answers in thousands. Operating Profits

Answer 1

Question

Chapter 21, Problem 2MAD

a.

To determine

Prepare a vertical analysis of the sales as a percent of total sales for the three segments, and identify the segment which has highest percentage of total sales.

b.

To determine

Determine the earnings before interest, taxes, depreciation, and amortization (EBITDA) for the three segments.

c.

To determine

Determine the EBITDA as a percent of sales (EBITDA margin) for the three segments.

d.

To determine

Interpret the analysis in EBITDA margin calculated in Part C.

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Eastlawn Travel has two operating divisions, Tours and Resorts. The two divisions meet the requirements for segment disclosures. Before transactions between the two divisions are considered, revenues and costs are as follows: Revenues Costs Tours $ 35,200,000 19,800,000 The two divisions have an arrangement by which Resorts gives coupons redeemable for tours and Tours gives discount coupons good for stays at a resort. The value of the coupons for the tours redeemed during the past year totaled $5.3 million. The discount coupons redeemed at the resorts totaled $2.2 million. As of the end of the year, all coupons for the current year expired. Tours Resorts Resorts $ 24,200,000 17,600,000 Required: What are the operating profits for each division considering the effects of the costs arising from the joint agreement? Note: Enter your answers in thousands. Operating Profits

The Carioco Company has two divisions that operate independently of one another. The financial data for the year 2022 reported the following results: Alpha Beta Sales $3,000,000 $2,500,000 Operating income 750,000 550,000 Taxable income 650,000 375,000 Investment 6,000,000 5,000,000 The company's desired rate of return is 10%. Income is defined as operating income. Required: What are the respective return-on-investment ratios for the Alpha and Beta Divisions? a. 0.110 and 0.125 b. 0.125 and 0.110 c. 0.050 and 0.150 d. 0.108 and 0.075

Answer 2

Question

Chapter 21, Problem 2MAD

a.

To determine

Prepare a vertical analysis of the sales as a percent of total sales for the three segments, and identify the segment which has highest percentage of total sales.

b.

To determine

Determine the earnings before interest, taxes, depreciation, and amortization (EBITDA) for the three segments.

c.

To determine

Determine the EBITDA as a percent of sales (EBITDA margin) for the three segments.

d.

To determine

Interpret the analysis in EBITDA margin calculated in Part C.

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Answer 3

Question

Chapter 21, Problem 2MAD

a.

To determine

Prepare a vertical analysis of the sales as a percent of total sales for the three segments, and identify the segment which has highest percentage of total sales.

b.

To determine

Determine the earnings before interest, taxes, depreciation, and amortization (EBITDA) for the three segments.

c.

To determine

Determine the EBITDA as a percent of sales (EBITDA margin) for the three segments.

d.

To determine

Interpret the analysis in EBITDA margin calculated in Part C.

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Answer 4

Question

Chapter 21, Problem 2MAD

a.

To determine

Prepare a vertical analysis of the sales as a percent of total sales for the three segments, and identify the segment which has highest percentage of total sales.

b.

To determine

Determine the earnings before interest, taxes, depreciation, and amortization (EBITDA) for the three segments.

c.

To determine

Determine the EBITDA as a percent of sales (EBITDA margin) for the three segments.

d.

To determine

Interpret the analysis in EBITDA margin calculated in Part C.

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Answer 5

Chapter 21, Problem 2MAD

a.

To determine

Prepare a vertical analysis of the sales as a percent of total sales for the three segments, and identify the segment which has highest percentage of total sales.

b.

To determine

Determine the earnings before interest, taxes, depreciation, and amortization (EBITDA) for the three segments.

c.

To determine

Determine the EBITDA as a percent of sales (EBITDA margin) for the three segments.

d.

To determine

Interpret the analysis in EBITDA margin calculated in Part C.

Answer 6

Chapter 21, Problem 2MAD

a.

To determine

Prepare a vertical analysis of the sales as a percent of total sales for the three segments, and identify the segment which has highest percentage of total sales.

Answer 7

Chapter 21, Problem 2MAD

a.

To determine

Prepare a vertical analysis of the sales as a percent of total sales for the three segments, and identify the segment which has highest percentage of total sales.

Answer 8

b.

To determine

Determine the earnings before interest, taxes, depreciation, and amortization (EBITDA) for the three segments.

Answer 9

b.

To determine

Determine the earnings before interest, taxes, depreciation, and amortization (EBITDA) for the three segments.

Answer 10

c.

To determine

Determine the EBITDA as a percent of sales (EBITDA margin) for the three segments.

Answer 11

c.

To determine

Determine the EBITDA as a percent of sales (EBITDA margin) for the three segments.

Answer 12

d.

To determine

Interpret the analysis in EBITDA margin calculated in Part C.

Answer 13

d.

To determine

Interpret the analysis in EBITDA margin calculated in Part C.

Answer 14

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Prepare a vertical analysis of the sales as a percent of total sales for the three segments, and identify the segment which has highest percentage of total sales.

Solution Summary: The author explains the method of vertical analysis, which is useful for evaluating company’s performance and financial condition.

Prepare a vertical analysis of the sales as a percent of total sales for the three segments, and identify the segment which has highest percentage of total sales.

Determine the earnings before interest, taxes, depreciation, and amortization (EBITDA) for the three segments.

Determine the EBITDA as a percent of sales (EBITDA margin) for the three segments.

Interpret the analysis in EBITDA margin calculated in Part C.

Chapter 21 Solutions