Question

The Pacific Division of Henson Industries reported the following
data for the current year.

Sales | $4,000,000 | ||

Variable costs | 2,600,000 | ||

Controllable fixed costs | 800,000 | ||

Average operating assets | 5,000,000 |

Top management is unhappy with the investment center's return on
investment (ROI). It asks the manager of the Pacific Division to
submit plans to improve ROI in the next year. The manager believes
it is feasible to consider the following independent courses of
action.

1. | Increase sales by $400,000 with no change in the contribution margin percentage. | ||

2. | Reduce variable costs by $120,000. | ||

3. | Reduce average operating assets by 4% |

a. Compute the return on investment (ROI) for the current year. I already did this and got an answer of 12% which is correct.

b.Using ROI formula, compute the ROI under each of the proposed courses of action.

For proposed action one the answers 12% and 13.2% are wrong. THIS IS WHAT I NEED HELP WITH. I cannot determine why I did not get the right answer.

For proposed action two I got 14.4% which is correct.

For proposed action three I got 12.5% which is correct.

Answer #1

The South Division of Wiig Company reported the following data
for the current year.
Sales
$2,950,000
Variable costs
1,947,000
Controllable fixed costs
595,000
Average operating assets
5,000,000
Top management is unhappy with the investment center’s return on
investment (ROI). It asks the manager of the South Division to
submit plans to improve ROI in the next year. The manager believes
it is feasible to consider the following independent courses of
action.
1.
Increase
sales by $300,000 with no change in...

The South Division of Wiig Company reported the following data
for the current year.
Sales
$3,000,000
Variable costs
2,010,000
Controllable fixed costs
605,000
Average operating assets
5,000,000
Top management is unhappy with the investment center’s return on
investment (ROI). It asks the manager of the South Division to
submit plans to improve ROI in the next year. The manager believes
it is feasible to consider the following independent courses of
action.
1.
Increase
sales by $300,000 with no change in...

The South Division of Wiig Company reported the following data
for the current year.
Sales $2,929,000
Variable costs 1,933,140
Controllable fixed costs 603,800
Average operating assets 5,093,400
Top management is unhappy with the investment center’s return on
investment (ROI). It asks the manager of the South Division to
submit plans to improve ROI in the next year. The manager believes
it is feasible to consider the following independent courses of
action.
1. Increase sales by $319,000 with no change in...

The Green Division of Frizell Company reported the following
data for the current year.
Sales $3,500,000
Variable costs 2,000,000
Controllable fixed costs 700,000
Average operating assets 5,500,000
Top management is unhappy with the investment center’s return on
investment (ROI). It asks the manager of the Green Division to
submit plans to improve ROI in the next year. The manager believes
it is feasible to consider the following independent courses of
action.
1. Increase sales by $330,000 with no change in...

For its three investment centers, Gerrard Company accumulates
the following data: I II III Sales $2,070,000 $4,062,000 $4,044,000
Controllable margin 712,320 2,054,520 4,461,090 Average operating
assets 5,088,000 7,902,000 12,057,000 The centers expect the
following changes in the next year: (I) increase sales 18%; (II)
decrease costs $430,000; (III) decrease average operating assets
$450,000. Compute the expected return on investment (ROI) for each
center. Assume center I has a controllable margin percentage of
70%. (Round ROI to 1 decimal place, e.g....

n the current year, the New Products Division of Testar Company
had operating income of $8,000,000 and operating assets of
$44,800,000. Testar has set a target return on investment (ROI) of
16% for each of its divisions. Which of the following statements is
correct?
Multiple Choice
The New Products division yielded ROI that was lower than the
target ROI.
Residual income for the New Products division was $832,000.
The New Products division yielded no residual income.
All of these are...

The Ste. Marie Division of Pacific Media Corporation just
started operations. It purchased depreciable assets costing $47
million and having a four-year expected life, after which the
assets can be salvaged for $9.4 million. In addition, the division
has $47 million in assets that are not depreciable. After four
years, the division will have $47 million available from these
nondepreciable assets. This means that the division has invested
$94 million in assets with a salvage value of $56.4 million. Annual...

Selected operating data for two divisions of Outback Brewing,
Ltd., of Australia are given below:
Division
Queensland
New South Wales
Sales
$
855,000
$
2,200,000
Average operating assets
$
570,000
$
550,000
Net operating income
$
44,460
$
48,400
Property, plant, and equipment (net)
$
244,000
$
194,000
Required:
1. Compute the rate of return for each division using the return
on investment (ROI) formula stated in terms of margin and
turnover.
2. Which divisional manager seems to be doing...

Return on Investment, Margin, Turnover
Data follow for the Construction Division of D. Jack Inc.:
Year 1 Sales $141,075,000
Operating income 9,801,000
Average operating assets 354,375,000
Year 2 Sales $178,475,000
Operation Income 8,923,750
Average operating assets 365,062,500
If required, round your answers to two decimal places.
Required:
1. Compute the margin (as a percent) and turnover ratios for
each year:
Year 1
Margin: %
Turnover:
Year 2
Margin: %
Turnover:
Compute the ROI (as a percent) for the Construction Division...

Bridgeport, Inc., reported the following results for last
year.
Liles Division Marston Division Outland Division
Net operating income $127,000 $55,200 $243,000
Sales revenue 600,000 150,000 1,200,000
Average operating assets 1,040,000 300,000 1,518,000
(a) Calculate margin for each division. (Round answers to 1 decimal
place, e.g. 5.1%.)
Margin
Liles %
Marston %
Outland %
Which division generates the highest margin?
Outland
Liles
Marston
(b) Calculate ROI for each division. (Round answers to 1 decimal
place, e.g. 5.1%.)
Return on Investment
Liles...

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