Question
In: Accounting
ROI and Residual Income:Basic Computations Watkins Associated Industries is a highly diversified company with three divisions:...
ROI and Residual Income:Basic Computations
Watkins Associated Industries is a highly diversified company with
three divisions: Trucking, Seafood, and Construction. Assume that
the company uses return on investment and residual income as two of
the evaluation tools for division managers. The company has a
minimum desired rate of return on investment of 10 percent with a
30 percent tax rate. Selected operating data for three divisions of
the company follow.
| Trucking Division | Seafood Division | Construction Division | |
|---|---|---|---|
| Sales | $1,200,000 | $780,000 | $900,000 |
| Operating assets | 600,000 | 260,000 | 330,000 |
| Net operating income | 101,000 | 60,000 | 62,000 |
(a) Compute the return on investment for each division. (Round
answers to three decimal places.)
Trucking ROI = Answer
Seafood ROI = Answer
Construction ROI = Answer
(b) Compute the residual income for each division.
| Residual Income | Trucking | Seafood | Construction |
|---|---|---|---|
| Net operating income | |||
| Minimum level | |||
| Residual income |
Solutions
Expert Solution
Answer:-
| Particulars | Trucking Division | Sea Food Division | Construction Division |
| Sales | 12,00,000 | 7,80,000 | 9,00,000 |
| Operating Assets | 6,00,000 | 2,60,000 | 3,30,000 |
| Net Operating Income | 1,01,000 | 60,000 | 62,000 |
| Return of Income | 0.17 | 0.23 | 0.19 |
| (Net operating income / Operating assets) | |||
| Desired ROI | 10% | 10% | 10% |
| Minimum Level | 60,000 | 26,000 | 33,000 |
| (Operating Assets X | |||
| Desired ROI) | |||
| Residual Income | 41,000 | 34,000 | 29,000 |
| (NOI-Minimum Level) |
ekkarill92 answered 1 year agoRelated Solutions
ROI, Residual Income Raddington Industries produces tool and die machinery for manufacturers. The company expanded vertically...
ROI, Residual
Income
Raddington Industries
produces tool and die machinery for manufacturers. The company
expanded vertically in 20x1 by acquiring one of its suppliers of
alloy steel plates, Keimer Steel Company. To manage the two
separate businesses, the operations of Keimer are reported
separately as an investment center.
Raddington monitors
its divisions on the basis of both unit contribution and return on
average investment (ROI), with investment defined as average
operating assets employed. Management bonuses are determined on
ROI. All...
ROI, Residual Income Raddington Industries produces tool and die machinery for manufacturers. The company expanded vertically...
ROI, Residual Income
Raddington Industries produces tool and die machinery for
manufacturers. The company expanded vertically in 20x1 by acquiring
one of its suppliers of alloy steel plates, Keimer Steel Company.
To manage the two separate businesses, the operations of Keimer are
reported separately as an investment center.
Raddington monitors its divisions on the basis of both unit
contribution and return on average investment (ROI), with
investment defined as average operating assets employed. Management
bonuses are determined on ROI. All...
ROI, Residual Income Raddington Industries produces tool and die machinery for manufacturers. The company expanded vertically...
ROI, Residual Income
Raddington Industries produces tool and die machinery for
manufacturers. The company expanded vertically in 20x1 by acquiring
one of its suppliers of alloy steel plates, Keimer Steel Company.
To manage the two separate businesses, the operations of Keimer are
reported separately as an investment center.
Raddington monitors its divisions on the basis of both unit
contribution and return on average investment (ROI), with
investment defined as average operating assets employed. Management
bonuses are determined on ROI. All...
ROI, Residual Income Raddington Industries produces tool and die machinery for manufacturers. The company expanded vertically...
ROI, Residual Income
Raddington Industries produces tool and die machinery for
manufacturers. The company expanded vertically in 20x1 by acquiring
one of its suppliers of alloy steel plates, Keimer Steel Company.
To manage the two separate businesses, the operations of Keimer are
reported separately as an investment center.
Raddington monitors its divisions on the basis of both unit
contribution and return on average investment (ROI), with
investment defined as average operating assets employed. Management
bonuses are determined on ROI. All...
ROI, Residual Income Raddington Industries produces tool and die machinery for manufacturers. The company expanded vertically...
ROI, Residual
Income
Raddington Industries
produces tool and die machinery for manufacturers. The company
expanded vertically in 20x1 by acquiring one of its suppliers of
alloy steel plates, Keimer Steel Company. To manage the two
separate businesses, the operations of Keimer are reported
separately as an investment center.
Raddington monitors
its divisions on the basis of both unit contribution and return on
average investment (ROI), with investment defined as average
operating assets employed. Management bonuses are determined on
ROI. All...
ROI, Residual Income Raddington Industries produces tool and die machinery for manufacturers. The company expanded vertically...
ROI, Residual Income
Raddington Industries produces tool and die machinery for
manufacturers. The company expanded vertically in 20x1 by acquiring
one of its suppliers of alloy steel plates, Keimer Steel Company.
To manage the two separate businesses, the operations of Keimer are
reported separately as an investment center.
Raddington monitors its divisions on the basis of both unit
contribution and return on average investment (ROI), with
investment defined as average operating assets employed. Management
bonuses are determined on ROI. All...
National Industries is a diversified corporation with separate operating divisions. Each divisions performance is evaluated based...
National Industries is a diversified corporation with separate
operating divisions. Each divisions performance is evaluated based
on its total dollar profits and return on division investment. The
WindAir division manufactures and sells air conditioners. The
coming year's budgeted income statement, based on a sales volume of
15,000 units, is as follows:
Windair division
Budgeted incomes statement
For the Fiscal Year
Per Unit. Total (In thousands)
Sales revenue $400 $6,000
Manufacturing costs
Compressor 70 1,050
Other raw materials 37....
Transfer Pricing Exoplex Industries Inc. is a diversified aerospace company, including two operating divisions, Semiconductors and...
Transfer Pricing
Exoplex Industries Inc. is a diversified aerospace company,
including two operating divisions, Semiconductors and Navigational
Systems. Condensed divisional income statements, which involve no
intracompany transfers and include a breakdown of expenses into
variable and fixed components, are as follows:
Exoplex Industries Inc.
Divisional Income Statements
For the Year Ended December 31, 20Y8
Semiconductors
Division
Navigational
Systems
Division
Total
Sales:
2,240 units × $396 per unit
$887,040
$887,040
3,675 units × $590 per unit
$2,168,250
2,168,250
Total sales
$887,040...
Transfer Pricing Exoplex Industries Inc. is a diversified aerospace company, including two operating divisions, Semiconductors and...
Transfer Pricing
Exoplex Industries Inc. is a diversified aerospace
company, including two operating divisions, Semiconductors and
Navigational Systems. Condensed divisional income statements, which
involve no intracompany transfers and include a breakdown of
expenses into variable and fixed components, are as follows:
Exoplex Industries Inc.
Divisional Income Statements
For the Year Ended December 31,
20Y8 Semiconductors
DivisionNavigational
Systems
DivisionTotalSales: 2,240 units × $396
per unit $887,040 $887,040
3,675 units × $590 per
unit $2,168,250 2,168,250
...
Exoplex Industries Inc. is a diversified aerospace company, including two operating divisions, Semiconductors and Navigational Systems...
Exoplex Industries Inc. is a diversified aerospace company,
including two operating divisions, Semiconductors and Navigational
Systems divisions. Condensed divisional income statements, which
involve no intracompany transfers and include a breakdown of
expenses into variable and fixed components, are as follows:
EXOPLEX INDUSTRIES INC.
Divisional Income Statements
For the Year Ended December 31, 2016
1
Semiconductors Division
Navigational Systems Division
Total
2
Sales:
3
2,240 units @ $396 per unit
$887,040.00
$887,040.00
4
3,675 units @ $590 per unit
$2,168,250.00
2,168,250.00...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Compare the MOSFET, JFET , and BJT and identify the reasons these devices behave differently. What...
- How would you use SAS Enterprise Miner to create a neural network model of your example?
- Explain the use of neural networking modeling in predictive analytics.
- Current Market Mix of Netflix, as detail as possible, please.
- This is all one question, thank you so much in advance! You must evaluate a proposal...
- X Company is considering the purchase of a new processor that costs $200,000. Shipping and setup...
- There are a large number of tasks involved in information technology and programming, and many of...
ADVERTISEMENT