Question
In: Accounting
Power Inc. has two divisions, Windsor and Ridge. Following is the income statement for the past...
Power Inc. has two divisions, Windsor and Ridge. Following is
the income statement for the past month:
| Windsor | Ridge | Total | |||||||
| Sales | $ | 360,000 | $ | 320,000 | $ | 680,000 | |||
| Variable Costs | 280,000 | 150,000 | $ | 430,000 | |||||
| Contribution Margin | $ | 80,000 | $ | 170,000 | $ | 250,000 | |||
| Fixed Costs (allocated) | 122,000 | 128,000 | $ | 250,000 | |||||
| Profit Margin | $ | (42,000 | ) | $ | 42,000 | $ | 0 | ||
What would the impact on operating income be if Power Inc.
discontinued the Windsor Division and could save $24,000 in
allocated fixed costs?
Solutions
Expert Solution
Net loss will increase by $56,000
Or
We can say Net income will decrease by $56,000
Working
| After Discontinue of Windsor | |||
| Windsor | Ridge | Total | |
| Sales | $ 320,000.00 | $ 320,000.00 | |
| Variable Costs | $ 150,000.00 | $ 150,000.00 | |
| Contribution Margin | $ - | $ 170,000.00 | $ 170,000.00 |
| Fixed Costs (allocated) | $ 98,000.00 | $ 128,000.00 | $ 226,000.00 |
| Profit Margin | $ (98,000.00) | $ 42,000.00 | $ (56,000.00) |
.
| Income before discontinuing Windsor | $ - |
| Income After discontinuing Windsor | $ (56,000.00) |
| Decrease in income | $ (56,000.00) |
ekkarill92 answered 1 year agoRelated Solutions
Wilson Inc. has three divisions, Alpha, Beta and Gamma. Following is the income statement for the...
Wilson Inc. has three divisions, Alpha, Beta and Gamma.
Following is the income statement for the previous
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Alpha
Beta
Gamma
Total
Sales
$
1,000,000
$
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$
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$
2,000,000
Variable Costs
400,000
345,000
300,000
1,045,000
Contribution Margin
600,000
230,000
125,000
955,000
Fixed Costs
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159,375
750,000
Profit Margin
225,000
14,375
(34,375
)
205,000
Of the fixed costs, $300,000 is for corporate costs and is
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How much does Gamma Division have in...
Consider the following data, which relate to the two divisions of Oak Ridge Products: Division 1...
Consider the following data, which relate to the two divisions
of Oak Ridge Products:
Division 1
Division 2
Total assets
$68,300,000
$23,100,000
Noninterest-bearing current liabilities
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NOPAT
11,200,000
5,900,000
Required rate of return
11%
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Compare the two divisions in terms of return on investment and
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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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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...
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 $ 1,260,000 $ 1,890,000 Cost
of goods sold and operating expenses 945,000 1,323,000 Net
operating income $ 315,000 $ 567,000 Average invested assets $
6,300,000 $ 2,362,500 Orange has established a hurdle rate of 4
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
$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. Compute each division’s return on investment
(ROI) and residual income for last year.
2. Suppose Orange is investing in new technology
that...
Quinn Company has two divisions, Domestic and International. Invested assets and condensed income statement data for...
Quinn Company has two divisions, Domestic and International.
Invested assets and condensed income statement data for each
division for the year ended December 31, 2009, are as follows:
Domestic Division International Division
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Operating expenses 450,000 372,400
Service department charges 90,000 50,000
Invested assets 600,000 384,000
Instructions
1. Prepare condensed income statements for the past year for
each division.
2. Using the DuPont formula, determine the profit margin,
investment turnover, and return
on investment for each division.
3....
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