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In: Accounting
Arlington Clothing, Inc., shows the following information for its two divisions for year 1: Lake Region...
Arlington Clothing, Inc., shows the following information for its two divisions for year 1: Lake Region Coastal Region Sales revenue $ 4,160,000 $ 13,070,000 Cost of sales 2,691,300 6,535,000 Allocated corporate overhead 249,600 784,200 Other general and administration 553,900 3,755,000 Required: a. Compute divisional operating income for the two divisions. Ignore taxes. (Enter your answers in thousands of dollars rounded to 1 decimal place.) b-1. What are the gross margin and operating margin percentages for both divisions? (Enter your answers as a percentage rounded to 2 decimal places (i.e., 32.12).) b-2. How well have these divisions performed? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.) The gross margin percentage is higher in Lake Region. Divisional income is greater in Coastal Region. The gross margin percentage is higher in Coastal Region. Corporate overhead appears to be allocated on the basis of revenues. The operating margin is greater in Lake Region. Divisional income is greater in Lake Region.
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Expert Solution
Answer:
| Lake region | Coastal region | ||
| a | Sales (A) | 4160000 | 13070000 |
| Cost of Sales (B) | 2691300 | 6535000 | |
| Gross Margin (C=A-B) | 1468700 | 6535000 | |
| Allocated corporate overhead (D) | 249600 | 784200 | |
| Other general and admin('E) | 553900 | 3755000 | |
| Operating Income (F=C-D-E) | 665200 | 1995800 | |
| b-1 | Sales (A) | 4160000 | 13070000 |
| Gross Margin (C) | 1468700 | 6535000 | |
| Gross Margin Percentage (C/A*100) | 35.31 | 50.00 | |
| Operating Income (F) | 665200 | 1995800 | |
| Operating Income Percentage (F/A*100) | 15.75 | 15.27 | |
| b-2 | Following statements are correct | ||
| Divisional income is greater in Coastal region | |||
| Gross Margin % is higher in coastal region | |||
ekkarill92 answered 3 months agoRelated Solutions
Arlington Clothing, Inc., shows the following information for its two divisions for year 1. Lake Region...
Arlington Clothing, Inc., shows the following information for
its two divisions for year 1.
Lake Region
Coastal Region
Sales revenue
$
4,020,000
$
12,930,000
Cost of sales
2,621,300
6,465,000
Allocated corporate overhead
241,200
775,800
Other general and administration
539,900
3,741,000
Required:
b-1. What are the gross margin and operating
margin percentages for both divisions?
Lake Region
Coastal Region
Gross margin percentage
%
%
Operating margin
%
%
Forchen, Inc., provided the following information for two of its divisions for last year: Small...
Forchen, Inc., provided the following information for two of its
divisions for last year:
Small Appliances
Division
Cleaning Products
Division
Sales
$34,600,000
$31,350,000
Operating income
2,762,000
1,252,200
Operating assets, January 1
6,396,000
5,700,000
Operating assets, December 31
7,530,000
6,250,000
Forchen, Inc., requires an 8 percent minimum rate of return.
Required:
1. Calculate residual income for the Small
Appliances Division.
$
2. Calculate residual income for the Cleaning
Products Division.
$
3. What if the
minimum required rate of return...
Forchen, Inc., provided the following information for two of its divisions for last year: Small...
Forchen, Inc.,
provided the following information for two of its divisions for
last year:
Small Appliances
Division
Cleaning Products
Division
Sales
$34,690,000
$31,350,000
Operating income
2,365,700
1,252,700
Operating assets, January 1
6,397,000
5,670,000
Operating assets, December 31
7,550,000
6,590,000
Forchen, Inc.,
requires an 7 percent minimum rate of return.
Required:
1.
Calculate residual income for the Small Appliances Division.
$ _____
2.
Calculate residual income for the Cleaning Products Division.
$ _____
3.
What if the minimum required rate...
Calculating Residual Income Forchen, Inc., provided the following information for two of its divisions for last...
Calculating Residual Income
Forchen, Inc., provided the following information for two of its
divisions for last year:
Small Appliances
Division Cleaning Products
Division
Sales $34,630,000
$31,350,000
Operating income 2,653,000
1,253,000
Operating assets, January 1 6,393,000
5,730,000
Operating assets, December 31
7,530,000
6,040,000
Forchen, Inc., requires an 6 percent minimum rate of return.
Required:
1. Calculate residual income for the Small Appliances
Division.
$
2. Calculate residual income for the Cleaning Products
Division.
$
3. What if the minimum required...
Calculating Residual Income Forchen, Inc., provided the following information for two of its divisions for last...
Calculating Residual Income
Forchen, Inc., provided the following information for two of its
divisions for last year:
Small Appliances
Division
Cleaning Products
Division
Sales
$34,600,000
$31,350,000
Operating income
2,292,600
1,254,500
Operating assets, January 1
6,392,000
5,620,000
Operating assets, December 31
7,540,000
6,860,000
Forchen, Inc., requires an 6 percent minimum rate of return.
Required:
1. Calculate residual income for the Small
Appliances Division.
$ ___________
2. Calculate residual income for the Cleaning
Products Division.
$ ___________
3. What if the...
Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is...
Orange Corp. has two divisions: Fruit and Flower. The following
information for the past year is available for each division:
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Flower Division
Sales revenue
$780,000
$1,170,000
Cost of goods
sold and operating expenses
585,000
877,500
Net operating income
$195,000
$292,500
Average
invested assets
$1,950,000
$1,625,000
Orange
has established a hurdle rate of 6
percent.
Required:
1-a.
Compute
each division’s return on investment (ROI) and residual income for
last year.
(Enter your ROI answers as a percentage rounded to...
Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is...
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
$
660,000
$
990,000
Cost of goods sold and operating
expenses
495,000
742,500
Net operating income
$
165,000
$
247,500
Average invested assets
$
2,062,500
$
1,375,000
Orange has established a hurdle rate of 5
percent.
Required:
1-a. Compute each division’s return on investment
(ROI) and residual income for last year.(Enter your ROI...
Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is...
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
1-a. Compute each division’s return on investment
(ROI) and residual income for last year. (Enter your ROI answers as a
percentage rounded to two decimal places, (i.e.,...
Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is...
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
$
1,440,000
$
2,160,000
Cost of goods sold and operating
expenses
1,080,000
1,620,000
Net operating income
$
360,000
$
540,000
Average invested assets
$
3,000,000
$
2,160,000
Orange has established a hurdle rate of 8
percent.
Required:
1-a. Compute each division’s return on investment
(ROI) and residual income for last year. (Enter your...
Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is...
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
$
1,740,000
$
2,610,000
Cost of goods sold and operating
expenses
1,392,000
1,957,500
Net operating income
$
348,000
$
652,500
Average invested assets
$
3,480,000
$
2,718,750
Orange has established a hurdle rate of 6
percent.
Required:
1-a. Compute each division’s return on investment
(ROI) and residual income for last year. (Enter your...
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