Question

Return on Investment, Margin, Turnover Ready Electronics is facing stiff competition from imported goods. Its operating income margin has been declining steadily for the past several years. The company has been forced to lower prices so that it can maintain its market share. The operating results for the past 3 years are as follows: Year 1 Year 2 Year 3 Sales $12,000,000 $ 9,500,000 $ 9,000,000 Operating income 1,200,000 1,345,000 945,000 Average assets 15,000,000 15,000,000 16,750,000 For the coming year, Ready's president plans to install a JIT purchasing and manufacturing system. She estimates that inventories will be reduced by 70% during the first year of operations, producing a 20% reduction in the average operating assets of the company, which would remain unchanged without the JIT system. She also estimates that sales and operating income will be restored to Year 1 levels because of simultaneous reductions in operating expenses and selling prices. Lower selling prices will allow Ready to expand its market share. (Note: Round all numbers to two decimal places.) Required: 1. Compute the ROI, margin, and turnover for Years 1, 2, and 3. Year 1 Year 2 Year 3 ROI % % % Margin % % % Turnover 2. Conceptual Connection: Suppose that in Year 4 the sales and operating income were achieved as expected, but inventories remained at the same level as in Year 3. Compute the expected ROI, margin, and turnover. ROI % Margin % Turnover Why did the ROI increase over the Year 3 level? 3. Conceptual Connection: Suppose that the sales and net operating income for Year 4 remained the same as in Year 3 but inventory reductions were achieved as projected. Compute the ROI, margin, and turnover. ROI % Margin % Turnover Why did the ROI exceed the Year 3 level? 4. Conceptual Connection: Assume that all expectations for Year 4 were realized. Compute the expected ROI, margin, and turnover. ROI % Margin % Turnover Why did the ROI increase over the Year 3 level

Answer #1

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...

Return on Investment, Margin, Turnover
Data follow for the Construction Division of D. Jack Inc.:
Year 1
Year 2
Sales
$148,500,000
$162,250,000
Operating income
8,910,000
8,112,500
Average operating assets
337,500,000
405,625,000
(Note: 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
Year 2
Margin
%
%
Turnover
2. Compute the ROI (as a percent) for the
Construction Division for each year.
ROI year 1...

Break-Even Units, Contribution Margin Ratio, Multiple-Product
Breakeven, Margin of Safety, Degree of Operating Leverage
Jellico Inc.'s projected operating income (based on sales of
450,000 units) for the coming year is as follows:
Total
Sales
$11,700,000
Total variable cost
8,190,000
Contribution margin
$3,510,000
Total fixed cost
2,254,200
Operating income
$1,255,800
Required:
1(a). Compute variable cost per unit. Round
your answer to the nearest cent.
$per unit
1(b). Compute contribution margin per unit.
Round your answer to the nearest cent.
$per unit...

Profit Margin, Investment Turnover, and return on investment
The condensed income statement for the Consumer Products
Division of Fargo Industries Inc. is as follows (assuming no
service department charges):
Sales
$1,020,000
Cost of goods sold
459,000
Gross profit
$561,000
Administrative expenses
204,000
Income from operations
$357,000
The manager of the Consumer Products Division is considering
ways to increase the return on investment.
a. Using the DuPont formula for return on
investment, determine the profit margin, investment turnover, and
return on...

Elway Company provided the following income statement for the
last year:
Sales
$888,440,000
Less: Variable expenses
540,819,000
Contribution
margin
$347,621,000
Less: Fixed expenses
196,285,000
Operating income
$151,336,000
At the beginning of last year, Elway had $38,626,000 in
operating assets. At the end of the year, Elway had $41,362,000 in
operating assets.
Required:
1. Compute average operating assets.
$
2. Compute the margin (as a percent) and
turnover ratios for last year. If required, round your answers to
two decimal places....

Break-Even Units, Contribution Margin Ratio, Multiple-Product
Breakeven, Margin of Safety, Degree of Operating Leverage
Jellico Inc.'s projected operating income (based on sales of
450,000 units) for the coming year is as follows:
Total
Sales
$ 11,700,000
Total variable cost
6,669,000
Contribution margin
$ 5,031,000
Total fixed cost
2,871,024
Operating income
$ 2,159,976
Required:
1(a). Compute variable cost per unit. Enter
your answer to the nearest cent.
$per unit
1(b). Compute contribution margin per unit.
Enter your answer to the nearest...

Break-Even Units, Contribution Margin Ratio, Multiple-Product
Breakeven, Margin of Safety, Degree of Operating Leverage
Jellico Inc.'s projected operating income (based on sales of
450,000 units) for the coming year is as follows:
Total
Sales
$ 11,700,000
Total variable cost
7,371,000
Contribution margin
$ 4,329,000
Total fixed cost
2,705,144
Operating income
$ 1,623,856
1(a). Compute variable cost per unit. Enter
your answer to the nearest cent.
$per unit
1(b). Compute contribution margin per unit.
Enter your answer to the nearest cent....

Exercise 9-11 Accounts receivable turnover, inventory turnover,
and net margin LO 9-2, 9-4 Selected data from Stuart Company
follow: Balance Sheets As of December 31 2018 2017 Accounts
receivable $ 396,000 $ 380,000 Allowance for doubtful accounts
(19,800 ) (15,200 ) Net accounts receivable $ 376,200 $ 364,800
Inventories, lower of cost or market $ 476,500 $ 435,000 Income
Statement For the Years Ended December 31 2018 2017 Net credit
sales $ 2,017,000 $ 1,757,000 Net cash sales 419,000 308,000...

Margin of Safety and Operating Leverage
Medina Company produces a single product. The projected income
statement for the coming year is as follows:
Sales (60,000 units @ $23.00)
$1,380,000
Total variable cost
372,600
Contribution
margin
$ 1,007,400
Total fixed cost
973,820
Operating income
$ 33,580
Required:
1. Compute the break-even sales dollars.
$
2. Compute the margin of safety in sales
dollars.
$
3. Compute the degree of operating
leverage.
4. Compute the new operating income if sales
are 20%...

Zachary Corporation’s balance sheet indicates that the company
has $690,000 invested in operating assets. During the year, Zachary
earned operating income of $95,220 on $1,380,000 of
sales.
Required
Compute Zachary’s profit margin for the year.
Compute Zachary’s turnover for the year.
Compute Zachary’s return on investment for the year.
Recompute Zachary’s ROI under each of the following independent
assumptions:
(1) Sales increase from $1,380,000 to $1,656,000, thereby resulting
in an increase in operating income from $95,220 to $107,640.
(2) Sales...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 1 minute ago

asked 6 minutes ago

asked 15 minutes ago

asked 31 minutes ago

asked 32 minutes ago

asked 42 minutes ago

asked 45 minutes ago

asked 52 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago