Question

In: Accounting

Determining Missing Items from Computations Data for the North, South, East and West divisions of Free...

  1. Determining Missing Items from Computations

    Data for the North, South, East and West divisions of Free Bird Company are as follows:



    Sales

    Income from Operations

    Invested Assets
    Return on Investment Profit Margin
    Investment Turnover
    North $860,000 (a) (b) 17.5% 7.0% (c)
    South (d) $51,300 (e) (f) 4.5% 3.8
    East $1,020,000 (g) $680,000 15.0% (h) (i)
    West $1,120,000 $89,600 $560,000 (j) (k) (l)

    a. Determine the missing items, identifying each by the letters (a) through (l). If required, round percents and investment turnover to one decimal place.

    a. $
    b. $
    c.
    d. $
    e. $
    f. %
    g. $
    h. %
    i.
    j. %
    k. %
    l.

    b. Determine the The excess of divisional income from operations over a minimum acceptable income from operations.residual income for each division, assuming that the minimum acceptable rate of return established by management is 12%.

    Division Residual Income
    North Division $
    South Division $
    East Division $
    West Division $

    c. Which division is the most profitable in terms of (1) return on investment and (2) residual income?

    Most Profitable
    1. Return on Investment
    • North
    • East
    • South
    • West
    2. Residual Income
    • North
    • East
    • South
    • West

Solutions

Expert Solution

A.

Return on investment = Income from operations / Invested asstes

Profit margin = Income from operations / Sales

Investment turnover = Sales / Invested assets

Sales Income from operations Invested assets Return on Investment Profit margin Investment turnover
North 860,000 60,200 (860,000*7%) 344,000 (60,200/17.5%) 17.5% 7.0% 2.5 (860,000/344,000)
South

1,140,000 (51,300/4.5%)

51,300 300,000 (1,140,000/3.8) 17.1% (51,300/300,000) 4.5% 3.8
East 1,020,000 102,000 (680,000*15%) 680,000 15% 10% (102,000/1,020,000) 1.5 (1,020,000/680,000)
West 1,120,000 89,600 560,000 16% (89,600/560,000) 8% (89,600/1,120,000) 2 (1,120,000/560,000)

A = 60,200

B = 344,000

C = 2.5

D = 1,140,000

E = 300,000

F = 17.1%

G = 680,000

H = 10%

I = 1.5

J = 16%

K = 8%

L = 2

B.  

Residual income = Income from operations - (Invested assets*Return on Investment)

North = 60,200 - (344,000*12%) = 18,920

South = 51,300 - (300,000*12%) = 15,300

East = 102,000 - (680,000*12%) = 20,400

West = 89,600 - (560,000*12%) = 22,400

C.

1. North division (17.5%) is more profitable in terms of return on investment.

2. West division (22,400) is more profitable in terms of Residual income.


Related Solutions

Determining Missing Items from Computations Data for the North, South, East and West divisions of Free...
Determining Missing Items from Computations Data for the North, South, East and West divisions of Free Bird Company are as follows: Sales Income from Operations Invested Assets Return on Investment Profit Margin Investment Turnover North $860,000 (a) (b) 17.5% 7.0% (c) South (d) $51,300 (e) (f) 4.5% 3.8 East $1,020,000 (g) $680,000 15.0% (h) (i) West $1,120,000 $89,600 $560,000 (j) (k) (l) a. Determine the missing items, identifying each by the letters (a) through (l). If required, round percents and...
Determining Missing Items from Computations Data for the North, South, East and West divisions of Free...
Determining Missing Items from Computations Data for the North, South, East and West divisions of Free Bird Company are as follows: Sales Income from Operations Invested Assets Return on Investment Profit Margin Investment Turnover North $860,000 (a) (b) 17.5% 7.0% (c) South (d) $51,300 (e) (f) 4.5% 3.8 East $1,020,000 (g) $680,000 15.0% (h) (i) West $1,120,000 $89,600 $560,000 (j) (k) (l) a. Determine the missing items, identifying each by the letters (a) through (l). If required, round percents and...
Determining missing items in return and residual income computations Data for Uberto Company are presented in...
Determining missing items in return and residual income computations Data for Uberto Company are presented in the following table of rates of return on investment and residual incomes: Invested Assets Income from Operations Return on Investment Minimum Return Minimum Acceptable Income from Operations Residual Income $870,000 $191,400 (a) 12% (b) (c) $480,000 (d) (e) (f) $57,600 $19,200 $320,000 (g) 14% (h) $35,200 (i) $240,000 $48,000 (j) 12% (k) (l) Determine the missing values, identified by the letters above. For all...
Determining missing items in return and residual income computations Data for Uberto Company are presented in...
Determining missing items in return and residual income computations Data for Uberto Company are presented in the following table of returns on investment and residual incomes: Invested Assets Income from Operations Return on Investment Minimum Return on Investment Minimum Acceptable Income from Operations Residual Income $930,000 $204,600 (a) 12% (b) (c) $520,000 (d) (e) (f) $62,400 $20,800 $340,000 (g) 14% (h) $34,000 (i) $260,000 $54,600 (j) 12% (k) (l) Determine the missing values, identified by the letters above. For all...
Determining missing items in return and residual income computations Data for Uberto Company are presented in...
Determining missing items in return and residual income computations Data for Uberto Company are presented in the following table of rates of return on investment and residual incomes: Invested Assets Income from Operations Return on Investment Minimum Return Minimum Acceptable Income from Operations Residual Income $950,000 $228,000 (a) 13% (b) (c) $460,000 (d) (e) (f) $55,200 $18,400 $340,000 (g) 14% (h) $37,400 (i) $260,000 $52,000 (j) 12% (k) (l) Determine the missing values, identified by the letters above. For all...
Determining missing items in return and residual income computations Data for Uberto Company are presented in...
Determining missing items in return and residual income computations Data for Uberto Company are presented in the following table of rates of return on investment and residual incomes: Invested Assets Income from Operations Return on Investment Minimum Return Minimum Acceptable Income from Operations Residual Income $960,000 $230,400 (a) 13% (b) (c) $580,000 (d) (e) (f) $63,800 $29,000 $290,000 (g) 14% (h) $29,000 (i) $220,000 $46,200 (j) 12% (k) (l) Determine the missing values, identified by the letters above. For all...
From where highways404 (running north and south)and the 401(running east and west) cross in Toronto, car...
From where highways404 (running north and south)and the 401(running east and west) cross in Toronto, car A is 100km north of the 401 travelling south (towards the 401) at the constant speed of 100km/hour. Car B is 200km west of the 404 travelling east (towards the 404) at a constant speed of 100km/ hour. Assuming both cars do not stop, find the time that the cars are at theirminimum distance from each other.? What is that distance?
A company has 4 zones(north, south, east, west) and 4 supervisors available for assignment. It is...
A company has 4 zones(north, south, east, west) and 4 supervisors available for assignment. It is estimated that a typical supervisor operating in each zone would bring in the following annual turnover: north:126000, south 105000, east 84000, west 63000. The 4 supervisors are also considered to differ in supervisory competencies. It is estimated that working under the same conditions, the company's yearly turnover would be proportionately as follows: supervisor I:7, supervisor II: 5, supervisor III:5, supervisor IV: 4. How should...
Consider a City with district populations as follows: North: 9,300 South: 6,400 East: 9,000 West: 5,000...
Consider a City with district populations as follows: North: 9,300 South: 6,400 East: 9,000 West: 5,000 Suppose there are exactly 11 council seats. Find the standard divisor. Determine each district’s standard quota. Apportion the council seats using Webster’s plan. How many seats will each district receive?
A joint venture formed by South-East Investment Company (SEI) and North-West Property Limited (NWP) is going...
A joint venture formed by South-East Investment Company (SEI) and North-West Property Limited (NWP) is going to bid for a site that could be developed into an office building, providing a rentable area of 70,000 square foot. SEI will contribute 90% of the equity capital and NWP the remaining 10%. According to some estimates, it is believed that the chance to receive average rents of $100 per square foot is 60% and the chance to receive $60 per square foot...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT