Question

In: Accounting

Heather Smith Cosmetics (HSC) manufactures a variety of products and is organized into three divisions (investment...

Heather Smith Cosmetics (HSC) manufactures a variety of products and is organized into three divisions (investment centers): soap products, skin lotions, and hair products. Information about the most recent year’s operations follows. The information includes the value of intangible assets, including research and development, patents, and other innovations that are not included on HSC’s balance sheet. Were these intangibles to be included in the financial statements (as they are for EVA®), the increase in the balance sheet and the increase in after-tax operating income would be as given below:

Division Operating
Income
Average
Total Assets
Value of
Intangibles
Intangibles’
Effect on Income
Soap products $ 3,244,000 $ 59,994,000 $ 1,494,000 $ 994,000
Skin lotions 2,744,000 32,994,000 7,994,000 5,994,000
Hair products 4,994,000 54,994,000 994,000 694,000
Minimum desired rate of return 5.00 %
Cost of capital 4.00 %

Required:

1. Calculate the return on investment (ROI) for each division. (Round your answers to 2 decimal places. (i.e. .1234 = 12.34%))

2. Calculate the residual income (RI) for each division.

3. Calculate EVA® for each division.

Solutions

Expert Solution

I HOPE IT USEFUL TO YOU IF YOU HAVE ANY DOUBT PLZ COMMENT PLEASE GIVE ME UP-THUMB. THANKS....


Related Solutions

Heather Smith Cosmetics (HSC) manufactures a variety of products and is organized into three divisions (investment...
Heather Smith Cosmetics (HSC) manufactures a variety of products and is organized into three divisions (investment centers): soap products, skin lotions, and hair products. Information about the most recent year’s operations follows. The information includes the value of intangible assets, including research and development, patents, and other innovations that are not included on HSC’s balance sheet. Were these intangibles to be included in the financial statements (as they are for EVA), the increase in the balance sheet and the increase...
19-3 Heather Smith Cosmetics (HSC) manufactures a variety of products and is organized into three divisions...
19-3 Heather Smith Cosmetics (HSC) manufactures a variety of products and is organized into three divisions (investment centers): soap products, skin lotions, and hair products. Information about the most recent year’s operations follows. The information includes the value of intangible assets, including research and development, patents, and other innovations that are not included on HSC’s balance sheet. Were these intangibles to be included in the financial statements (as they are for EVA®), the increase in the balance sheet and the...
T-Comm makes a variety of products. It is organized in two divisions, North and South. The...
T-Comm makes a variety of products. It is organized in two divisions, North and South. The managers for each division are paid, in part, based on the financial performance of their divisions. The South Division normally sells to outside customers but, on occasion, also sells to the North Division. When it does, corporate policy states that the price must be cost plus 20 percent to ensure a “fair” return to the selling division. South received an order from North for...
Glaser Health Products of Ranier Falls, Georgia, is organized functionally into three divisions: Operations, Sales, and...
Glaser Health Products of Ranier Falls, Georgia, is organized functionally into three divisions: Operations, Sales, and Administrative. Purchasing, receiving, materials and production control, manufacturing, factory personnel, inventory stores, and shipping activities are under the control of the vice-president for operations, George Gottlieb. Advertising, market research, and sales are the responsibility of the vice- president for sales, Jake Bogan. Accounting, budgeting, the firm's computer center, and general office management are delegated to the corporate controller (Administrative), Charlie Kaplan. The following cost...
Heather Smith is considering a bond investment in LocklearAirlines. The $1,000 par value bonds have...
Heather Smith is considering a bond investment in Locklear Airlines. The $1,000 par value bonds have a quoted annual interest rate of 9 percent and the interest is paid semiannually. The yield to maturity on the bonds is 12 percent annual interest. There are 10 years to maturity. Compute the price of the bonds based on semiannual analysis. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods....
Optimus Company manufactures a variety of tools and industrial equipment. The company operates through three divisions....
Optimus Company manufactures a variety of tools and industrial equipment. The company operates through three divisions. Each division is an investment center. Operating data for the Home Division for the year ended December 31, 2020, and relevant budget data are as follows. Actual Comparison with Budget Sales $1,401,000 $101,000 favorable Variable cost of goods sold 680,000 55,000 unfavorable Variable selling and administrative expenses 125,000 26,000 unfavorable Controllable fixed cost of goods sold 169,000 On target Controllable fixed selling and administrative...
Heather Smith is considering a bond investment in Locklear Airlines. The $1,000 par value bonds have...
Heather Smith is considering a bond investment in Locklear Airlines. The $1,000 par value bonds have a quoted annual interest rate of 8 percent and the interest is paid semiannually. The yield to maturity on the bonds is 10 percent annual interest. There are 15 years to maturity. Compute the price of the bonds based on semiannual analysis. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods....
4. Heather Smith is considering a bond investment in Locklear Airlines. The $1,000 par value bonds...
4. Heather Smith is considering a bond investment in Locklear Airlines. The $1,000 par value bonds have a quoted annual interest rate of 11 percent and the interest is paid semiannually. The yield to maturity on the bonds is 14 percent annual interest. There are 10 years to maturity.        Compute the price of the bonds based on semiannual analysis. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial...
hamrock Investments has three divisions (Green, Clover, Seamrog) organized for performance evaluation purposes as investment centers....
hamrock Investments has three divisions (Green, Clover, Seamrog) organized for performance evaluation purposes as investment centers. Each division's required rate of return for purposes of calculating residual income (RI) is 15%. Budgeted operating results for 2020 for each of the three divisions are as follows: Division Operating income Operating Assets - Beginning of Year Operating Assets - End of Year Green $15,000,000 $90,000,000 $110,000,000 Clover 25,000,000 110,000,000 140,000,000 Seamrog 11,000,000 55,000,000 45,000,000 The company is planning an expansion, which will...
Poseidon Corporation manufactures a variety of gear for water sports. Poseidon has three divisions: Lake, River,...
Poseidon Corporation manufactures a variety of gear for water sports. Poseidon has three divisions: Lake, River, and Ocean. Each division is managed as an investment center. During the current year, the Ocean division experienced the following transactions: A special order was accepted at a selling price significantly less than the ordinary selling price. The sale will not impact other sales because this was a one-time order and Ocean has excess capacity. The selling price was in excess of total variable...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT