QS 24-11 Computing residual income LO A1
Investment
Center
Net Income
Average Assets
Cameras and
camcorders...
QS 24-11 Computing residual income LO A1
Investment
Center
Net Income
Average Assets
Cameras and
camcorders
$
6,150,000
$
26,900,000
Phones and communications
2,170,000
15,500,000
Computers and accessories
1,050,000
17,400,000
Assume a target income of 14% of average invested assets.
Required:
Compute residual income for each division. (Enter losses
with a minus sign.)
Target
Income
Cameras and Camcorders
Phones and Communications
Computers and Accessories
Targeted
return
Target
income
Residual
Income
Cameras and Camcorders
Phones and Communications
Computers and Accessories
Residual...
Exercise 10-12 Evaluating New Investments Using Return on
Investment (ROI) and Residual Income [LO10-1, LO10-2]
Selected...
Exercise 10-12 Evaluating New Investments Using Return on
Investment (ROI) and Residual Income [LO10-1, LO10-2]
Selected sales and operating data for three divisions of
different structural engineering firms are given as follows:
Division A
Division B
Division C
Sales
$
5,700,000
$
9,700,000
$
8,800,000
Average operating assets
$
1,140,000
$
4,850,000
$
1,760,000
Net operating income
$
273,600
$
853,600
$
180,400
Minimum required rate of return
17.00
%
17.60
%
14.00
%
Required:
1. Compute the return on...
Comart, a retailer of
consumer goods, provides the following information on two of its
departments (each...
Comart, a retailer of
consumer goods, provides the following information on two of its
departments (each considered an investment center).
Investment
Center
Sales
Net
Income
Average
Invested Assets
Electronics
$
11,000,000
$
788,500
$
4,150,000
Sporting goods
7,300,000
700,000
5,000,000
(1.1)
Compute return on
investment for each department. (Do not round your
intermediate calculations and round your final answers to the
nearest whole percentages. Omit the "%" sign in your
response.)
Return on
Investment
Electronics
%
Sporting goods
%
(1.2)...
The new department reported $11,250 net operating income with
$75,000 average operating assets this year. The...
The new department reported $11,250 net operating income with
$75,000 average operating assets this year. The department has a
new investment opportunity that would increase net operating income
by $4,375 with $35,000 additional investment.
Q) What will be true given that the company's minimum required rate
of return is 10%?
Multiple Choice
If the division is evaluated on the basis of Residual income,
the manager of the office product division would not accept the new
investment because it is bad...
Megamart, a retailer of consumer goods, provides the following
information on two of its departments (each...
Megamart, a retailer of consumer goods, provides the following
information on two of its departments (each considered an
investment center).
Investment Center
Sales
Income
Average
Invested Assets
Electronics
$
41,000,000
$
2,624,000
$
16,400,000
Sporting goods
18,600,000
1,860,000
12,400,000
1. Compute return on investment for each
department. Using return on investment, which department is most
efficient at using assets to generate returns for the
company?
2. Assume a target income level of 12% of average
invested assets. Compute residual income...
E10-7 Evaluating Managerial Performance Using Return on
Investment, Residual Income [LO 10-4, 10-5]
Orange Corp. has...
E10-7 Evaluating Managerial Performance Using Return on
Investment, Residual Income [LO 10-4, 10-5]
Orange Corp. has two divisions: Fruit and Flower. The following
information for the past year is available for each division:
Fruit Division
Flower Division
Sales revenue
$
1,560,000
$
2,340,000
Cost of goods sold and operating
expenses
1,170,000
1,755,000
Net operating income
$
390,000
$
585,000
Average invested assets
$
4,875,000
$
2,437,500
Orange has established a hurdle rate of 6
percent.
Required:
1-a. Compute each...
Luke Company has three divisions: Peak, View, and Grand. The
company has a hurdle rate of...
Luke Company has three divisions: Peak, View, and Grand. The
company has a hurdle rate of 6.51 percent. Selected operating data
for the three divisions follow:
Peak
View
Grand
Sales revenue
$
337,000
$
224,000
$
302,000
Cost of goods
sold
197,000
105,000
182,000
Miscellaneous
operating expenses
44,000
34,000
39,000
Average
invested assets
1,210,000
910,000
1,095,000
Required:
1. Compute the return on investment for each
division. (Enter your ROI
answers as a percentage rounded to two decimal places, (i.e.,
0.1234...
Wescott Company has three divisions: A, B, and C. The company
has a hurdle rate of...
Wescott Company has three divisions: A, B, and C. The company
has a hurdle rate of 8 percent. Selected operating data for the
three divisions are as follows:
Division A
Division B
Division C
Sales revenue
$
1,260,000
$
939,000
$
920,000
Cost of goods sold
779,000
689,000
668,000
Miscellaneous operating
expenses
65,000
53,000
54,000
Interest and taxes
49,000
42,000
42,000
Average invested assets
8,473,000
1,977,000
3,254,000
Wescott is considering an expansion project in the upcoming year
that will cost...
Exercise 11-12 Evaluating New Investments Using Return on
Investment (ROI) and Residual Income [LO11-1, LO11-2]
Selected...
Exercise 11-12 Evaluating New Investments Using Return on
Investment (ROI) and Residual Income [LO11-1, LO11-2]
Selected sales and
operating data for three divisions of different structural
engineering firms are given as follows:
Division A
Division B
Division C
Sales
$
16,100,000
$
28,880,000
$
20,880,000
Average
operating assets
$
3,220,000
$
7,220,000
$
5,220,000
Net operating
income
$
644,000
$
519,840
$
626,400
Minimum required
rate of return
8.00
%
8.50
%
12.00
%
Required:
1. Compute the return
on...
Residual Income and Investment Decisions. Jarriot, Inc.,
presented two years of data for its Furniture Division...
Residual Income and Investment Decisions. Jarriot, Inc.,
presented two years of data for its Furniture Division and its
Houseware Division.
Furniture Division:
Year 1
Year 2
Sales
$35,700,000
$37,700,000
Operating income
1,420,000
1,520,000
Average operating assets
2,750,000
2,750,000
Houseware Division:
Year 1
Year 2
Sales
$11,500,000
$12,600,000
Operating income
660,000
540,000
Average operating assets
5,500,000
5,500,000
At the end of Year 2, the manager of the Houseware Division is
concerned about the division’s performance. As a result, he...