Question
In: Accounting
A positive evaluation of a manager would include Residual Income of zero and an ROI greater...
A positive evaluation of a manager would include Residual Income of zero and an ROI greater than the minimum requirement
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Question 4
Residual income of $10,000 indicates the manager is earning above the minimum requirement but residual income of zero ($0) indicates the manager is earning below the minimum requirement.
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Residual income should not be used to evaluate a profit center.
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The World Peace Co. has three divisions: the Fox Division, the Tiger Division and the Panther Division. The following was reported at year end for each division. The company’s minimum requirement is 10%:
| Fox Division | Tiger Division | Panther Division | |
| Income from Operations (Net Income from Operations) | $300,000 | $100,000 | $200,000 |
| Average Operating Assets (Invested Assets) | $5,000,000 | $1,000,000 | $1,500,000 |
The Return on Investment (ROI) for the Fox Division is closest to
options:
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The World Peace Co. has three divisions: the Fox Division, the Tiger Division and the Panther Division. The following was reported at year end for each division. The company’s minimum requirement is 10%:
| Fox Division | Tiger Division | Panther Division | |
| Income from Operations (Net Income from Operations) | $300,000 | $100,000 | $200,000 |
| Average Operating Assets (Invested Assets) | $5,000,000 | $1,000,000 | $1,500,000 |
Residual Income for the Tiger Division is closest to options:
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The World Peace Co. has three divisions: the Fox Division, the Tiger Division and the Panther Division. The following was reported at year end for each division. The company’s minimum requirement is 10%:
| Fox Division | Tiger Division | Panther Division | |
| Income from Operations (Net Income from Operations) | $300,000 | $100,000 | $200,000 |
| Average Operating Assets (Invested Assets) | $5,000,000 | $1,000,000 | $1,500,000 |
Which manager is performing the best based on ROI?
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Solutions
ekkarill92 answered 2 years agoRelated Solutions
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What are the strengths and weaknesses of using Residual Income
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like to be assessed by, if you were a manager? Would it make a
difference if you were in charge of a department, plant, or major
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what is criticisms of ROI and why the residual income may be a
better indicator than the ROI?
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ROI and Residual Income:
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The Mustang Division of Detroit Motors had an operating income of
$900,000 and net assets of $4,000,000. Detroit Motors has a target
rate of return of 16 percent.
(a) Compute the return on investment. (Round your answer to three
decimal places.)
Answer
(b) Compute the residual income.
$Answer
(c) The Mustang Division has an opportunity to increase operating
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1. Compute the Mustang...
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Residual income, ROI, and EVA The following selected data pertain to Brannard Company's Construction Division for...
Residual income, ROI, and EVA
The following selected data pertain to Brannard Company's
Construction Division for last year.
Sales
$2,380,000
Variable costs
$1,428,000
Traceable fixed costs
$238,000
Average invested capital (assets)
$3,570,000
Current liabilities
$238,000
Required rate of return
15%
Marginal tax rate
36%
Weighted average cost of capital
12%
1. Calculate the residual income. $______
2. Calculate the return on investment. ______%
3. Calculate the economic value added. $______
Residual income, ROI, and EVA The following selected data pertain to Brannard Company's Construction Division for...
Residual income, ROI, and EVA The following selected data
pertain to Brannard Company's Construction Division for last
year.
Sales $2,380,000
Variable costs $1,428,000
Traceable fixed costs $238,000
Average invested capital (assets) $3,570,000
Current liabilities $238,000
Required rate of return 15%
Marginal tax rate 36%
Weighted average cost of capital 12%
QN:
1. Calculate the residual income. $______
2. Calculate the return on investment. ______%
3. Calculate the economic value added. $______
For the first company division listed, insert formula commands to calculate ROI and Residual income (assume...
For the first company division listed, insert formula commands
to calculate ROI and Residual income (assume the
company has a 25% target rate of return). To insert formulas,
highlight the cell where you want to place the answer. (Please
Provide Excel Formula used)
Use the “Copy” and “Paste”
commands to copy the same formulas into the appropriate cell for
each division.
Use the “%” on the “Number”
section of the menu bar to format the ROI as a percentage. Format...
ROI, Residual Income, and EVA with Different Bases Envision Company has a target return on capital...
ROI, Residual Income, and EVA with Different Bases Envision
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Software Division . Consulting Division Venture Capital
Division
(Value Base) (Value Base) (Value Base)
Book Current Book Current Book Current
Sales $100,000 $100,000 $200,000 $200,000 $800,000 $800,000
Income 12,250 11,700 16,400 20,020 56,730 51,920
Assets 70,000 90,000 100,000 110,000 610,000 590,000
Liabilities 10,000 10,000 14,000 14,000 40,000 40,000
Required
a. Compute...
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Raddington monitors
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