Question

The Pacific Division of Henson Industries reported the following data for the current year. Sales $4,000,000...

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.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The South Division of Wiig Company reported the following data for the current year. Sales $2,950,000...
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...
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...
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...
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...
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...
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...
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...
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...
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...
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...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT