Question
In: Accounting
Calculating Average Operating Assets, Margin, Turnover, Return on Investment (ROI) Forchen, Inc., provided the following information...
Calculating Average Operating Assets, Margin, Turnover, Return on Investment (ROI)
Forchen, Inc., provided the following information for two of its divisions for last year:
| Small Appliances Division |
Cleaning Products Division |
|
| Sales | $34,670,000 | $34,800,000 |
| Operating income | 2,773,600 | 1,392,000 |
| Operating assets, January 1 | 6,394,000 | 5,600,000 |
| Operating assets, December 31 | 7,474,000 | 6,000,000 |
Required:
1. For the Small Appliances Division, calculate:
| a. Average operating assets | $ | |
| b. Margin | % | |
| c. Turnover | ||
| d. Return on investment (ROI) | % |
2. For the Cleaning Products Division, calculate:
| a. Average operating assets | $ | |
| b. Margin | % | |
| c. Turnover | ||
| d. Return on investment (ROI) | % |
3. What if operating income for the Small Appliances Division was $2,080,200? How would that affect average operating assets? Margin? Turnover? ROI? Calculate any changed ratios. When required, round the percent to four decimal places before converting to a percentage. For example, .88349 would be rounded to .8835 and entered as 88.35. Enter "0", where ever required.
| Average operating assets | Unaffected | by %__ |
| Margin | Lower | by %__ |
| Turnover | Unaffected | by %__ |
| Return on investment (ROI) | Lower | by %__ |
Solutions
Expert Solution
| Revised | ||||||||
| Small Appliances | Cleaning Products | Small Appliances | ||||||
| Division | Division | Division | ||||||
| Sales | 34,670,000 | 34,800,000 | 34,670,000 | |||||
| Operating income | 2,773,600 | 1,392,000 | 2,080,200 | |||||
| Operating assets, January 1 | 6,394,000 | 5,600,000 | 6,394,000 | |||||
| Operating assets, December 31 | 7,474,000 | 6,000,000 | 7,474,000 | |||||
| Answer | Formula Used | Equation | ||||||
| 1 | Average Opertaing Assets | 6,934,000 | (Opening Assets+Closing)/2 | (6394000+7474000)/2 | ||||
| Margin | 8.00% | (Operating Income/Sales) | (2773600/34670000) | |||||
| Turnover | 34,670,000 | Sales | ||||||
| ROI | 40.00% | (Operating Income/Av Operating Assets) | (2773600/6934000) | |||||
| Answer | Formula Used | Equation | ||||||
| 2 | Average Opertaing Assets | 5,800,000 | (Opening Assets+Closing)/2 | (5600000+6000000)/2 | ||||
| Margin | 4.00% | (Operating Income/Sales) | (1392000/34800000) | |||||
| Turnover | 34,800,000 | Sales | ||||||
| ROI | 24.00% | (Operating Income/Av Operating Assets) | (1392000/5800000) | |||||
| Answer | Formula Used | Equation | ||||||
| 3 | Average Opertaing Assets | 6,934,000 | (Opening Assets+Closing)/2 | (6394000+7474000)/2 | ||||
| Margin | 6.00% | (Operating Income/Sales) | (2080200/34670000) | |||||
| Turnover | 34,670,000 | Sales | ||||||
| ROI | 30.00% | (Operating Income/Av Operating Assets) | (2080200/6934000) | |||||
|
Average operating assets |
Unaffected | by 0% | ||||||
| Margin | Lower | by 2% | ||||||
| Turnover | Unaffected | by 0% | ||||||
| Return on investment (ROI) | Lower | by 10% | ||||||
ekkarill92 answered 2 years agoRelated Solutions
Calculating Average Operating Assets, Margin, Turnover, Return on Investment (ROI) Forchen, Inc., provided the following information...
Calculating Average Operating Assets, Margin, Turnover, Return
on Investment (ROI)
Forchen, Inc., provided the following information for two of its
divisions for last year:
Small Appliances
Division
Cleaning Products
Division
Sales
$34,670,000
$29,000,000
Operating income
2,773,600
1,160,000
Operating assets, January 1
6,394,000
5,600,000
Operating assets, December 31
7,474,000
6,000,000
Required:
1. For the Small Appliances Division,
calculate:
a. Average operating assets
$ fill in the blank 1
b. Margin
fill in the blank 2
%
c. Turnover
fill in the...
Margin, Turnover, Return on Investment, Average Operating Assets Elway Company provided the following income statement for...
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Elway Company provided the following income statement for the
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Sales
$749,320,000
Less: Variable expenses
551,128,000
Contribution margin
$198,192,000
Less: Fixed expenses
198,192,000
Operating income
$0
At the beginning of last year, Elway had $38,624,000 in
operating assets. At the end of the year, Elway had $41,390,000 in
operating assets.
Required:
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Margin, Turnover, Return on Investment, Average Operating
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Elway Company provided the following income statement for the
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Contribution
margin
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Less: Fixed expenses
195,596,000
Operating income
$122,710,000
At the beginning of last year, Elway had $38,662,000 in
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operating assets.
Required:
1. Compute average operating assets.
$
2. Compute the margin (as a percent) and
turnover ratios for last year. If...
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Mastery
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Return on
Investment (ROI)
The manager of an
investment center should be evaluated based on revenues, costs, and
investments. An evaluation based on net income ignores the amount
of investment the investment center required. One way to measure
operating profit in relation to investment is a calculation called
the return on investment.
One formula for calculating return on investment is:
Operating income
Invested Assets
ROI is effective
because it takes into consideration...
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investments. An evaluation based on net income ignores the amount
of investment the investment center required. One way to measure
operating profit in relation to investment is a calculation called
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One formula for calculating return on investment is:
Operating income
Invested Assets
ROI is effective
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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...
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
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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...
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Average assets
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15,000,000
15,500,000
For the coming year,...
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