Question

In: Accounting

Lombard, Inc. has two investment centers and has developed the following information: Department A Department B...

Lombard, Inc. has two investment centers and has developed the following information: Department A Department B Departmental controllable margin $120,000 ? Average operating assets ? $400,000 Sales 800,000 250,000 ROI 10% 12% Answer the following questions about Department A and Department B.

1. What was the amount of Department A's average operating assets? Average Operating Assets $ ?

2. What was the amount of Department B's controllable margin? Controllable Margin $ ?

3. If Department B is able to reduce its operating assets by $100,000, what would be Department B's new ROI ? New ROI %?

4. If Department A is able to increase its controllable margin by $60,000 as a result of reducing variable costs, what would be Department A's new ROI? New ROI %?

Expert Solution

Department A Department B

Controllable margin $120,000 ?

Average operating assets ? $400,000

Sales 800,000 250,000

ROI 10% 12%

1. Department A's average operating assets = Controllable margin / ROI

= $ 120,000 / 10% = $ 12,00,000

2. Department B's controllable margin = Average operating assets * ROI

= $ 4,00,000 * 12%

= $ 48,000

3. New net operating assets = $ 4,00,000 - $ 1,00,000 = $ 3,00,000

New ROI = Controllable margin / New net operating assets

= $ 48,000 / $ 3,00,000

= 16%

4. New controllable margin = $ 1,20,000 + $ 60,000 = $ 1,80,000

New ROI = New controllable margin / Average operating assets

= $ 1,80,000 / $ 12,00,000

= 15%

ekkarill92 answered 1 year ago

Consider the following information on two risky asset: Investment A and Investment B. State of the...

Consider the following information on two risky asset: Investment A and Investment B. State of the Economy Probability of State of Economy Return on Investment A (%) Return on Investment B (%) Recession 0.4 16% 12% Normal 0.3 18% 14% Boom 0.3 5% 28% a. What is the expected return for Investment A? b. What is the expected return for Investment B? c. What is the standard deviation for Investment A? d. What is the standard deviation for Investment B?...

Zeta Department Store has developed the following information in order to develop a TDABC model for...

Zeta Department Store has developed the following information in order to develop a TDABC model for its accounts receivable department: Activity Estimated worker time to perform activity manual processing of invoice and cash receipt 1.0 hour electronic processing of invoice and electronic funds transfer 0.1 hour maintain customer file 0.5 hour The time to process payments of customer invoices depends on whether the customer pays the bill manually or electronically, as shown above. The time to maintain each customer file...

The Dylap Corporation has two service centers: IS (information systems) and accounting. The service centers provide...

The Dylap Corporation has two service centers: IS (information systems) and accounting. The service centers provide services to one another as well as to the three operating divisions: Dysap, Dynap and Dycap. The distribution of each service center’s output as well as its costs (in millions) is given as follows: Fraction of Service Center Output Used Dysap Dynap Dycap Total IS Accounting Division Division Division Cost IS 0.15 0.22 0.23 0.15 0.25 $17.3 Accounting 0.04 0.16 0.38 0.27 0.15...

Marian Corporation has two separate divisions that operate as profit centers. The following information is available...

Marian Corporation has two separate divisions that operate as profit centers. The following information is available for the most recent year: Black Division Navy Division Sales (net) $ 400,000 $ 350,000 Salary expense 23,000 43,000 Cost of goods sold 140,000 154,000 The Black Division occupies 22,000 square feet in the plant. The Navy Division occupies 33,000 square feet. Rent is an indirect expense and is allocated based on square footage. Rent expense for the year was $55,000. Compute departmental income...

The following is partial information for the month of March for Macmillan International Inc., a two-department...

The following is partial information for the month of March for Macmillan International Inc., a two-department manufacturer that uses process costing: Determine assignment of costs. Work in process, beginning (67% converted) 15,000 units Costs of beginning work in process: Transferred in from department A $ 9,500 Materials 0 Conversion 11,200 Units completed and transferred out during March 45,000 units Units transferred in during March from department A ? units Work in process, ending (37.5% converted) 16,000 units Materials costs added...

B Inc. has developed a new product, and the consumers are interested in it. As a...

B Inc. has developed a new product, and the consumers are interested in it. As a result, the firm projects the growth rate of dividends is 20% per year for 4 years. By then, other firms will develop similar products, competition will drive down profit margins, and the sustainable growth rate will fall to 6%. B Inc. just paid annual dividend of $1 per share. The required return on the company’s stock is 10%. What is the stock price today?...

Friedman Manufacturing, Inc. has prepared the following information regarding two investments under consideration. Which investment is...

Friedman Manufacturing, Inc. has prepared the following information regarding two investments under consideration. Which investment is better, based on risk (as measured by the standard deviation) and return? Common Stock A Common Stock B Probability Return Probability Return .20 12% .10 4% .50 18% .30 6% .30 27% .40 10% .20 15%

Company XYZ Sdn Bhd has two production departments; Department A and Department B.

Company XYZ Sdn Bhd has two production departments; Department A and Department B. The company uses the basis direct labor hour to determine predetermine overhead rate. A total of 3 500 units were produced on Job 3113.The following information relates to both departments for the year 2019:Department ADepartment BBudgeted manufacturing overheadRM 500 000RM 250 000Budgeted direct labor hours32 00025 500Budgeted machine hours3 00018 000The company shows the following information relates to Job 3113:Materials requisitioned RM 20 000Direct labor cost RM...

You are analyzing the following two projects and have developed the following information. Project A |...

You are analyzing the following two projects and have developed the following information. Project A | Project B Year | Cash flow | Cash flow 0 | -$50,000 | -$50,000 1 | $31,000 | $42,000 2 | $26,000 | $21,000 3 | $27,000 | $18,000 5. What is the crossover rate of the two projects? 6. Project A and B are mutually exclusive. Which project(s) should be chosen if the required return is 8%? Why? 7. Project A and B...

Wild Sun Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the...

Wild Sun Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared: WILD SUN AIRLINES INC. Divisional Income Statements For the Year Ended December 31, 20Y9 1 Passenger Division Cargo Division 2 Revenues $3,065,000.00 $3,065,000.00 3 Operating expenses 2,425,000.00 2,754,000.00 4 Income from operations before service department charges $640,000.00 $311,000.00 5 Less service department charges: 6 Training $135,150.00 $135,150.00 7 Flight scheduling 97,200.00 97,200.00 8 Reservations 151,400.00...