Question
In: Accounting
Required information [The following information applies to the questions displayed below.] Megamart, a retailer of consumer...
Required information
[The following information applies to the questions
displayed below.]
Megamart, a retailer of consumer goods, provides the following
information on two of its departments (each considered an
investment center).
| Investment Center | Sales | Income |
Average Invested Assets |
||||||
| Electronics | $ | 40,000,000 | $ | 2,880,000 | $ | 16,000,000 | |||
| Sporting goods | 20,000,000 | 2,040,000 | 12,000,000 | ||||||
1. Compute return on investment for each
department. Using return on investment, which department is most
efficient at using assets to generate returns for the
company?
2. Assume a target income level of 12% of average
invested assets. Compute residual income for each department. Which
department generated the most residual income for the
company?
3. Assume the electronics department is presented
with a new investment opportunity that will yield a 15% return on
investment. Should the new investment opportunity be accepted?
Solutions
Expert Solution
1. Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company?
| Return on investment | |
| Electronics | 2880000*100/16000000 = 18% |
| Sporting goods | 2040000*100/12000000 = 17% |
Electronics department is most efficient at using assets to generate returns for the company.
2. Assume a target income level of 12% of average invested assets. Compute residual income for each department. Which department generated the most residual income for the company
| Residual income | |
| Electronics | 2880000-(16000000*12%) = 960000 |
| Sporting goods | 2040000-(12000000*12%) = 600000 |
Electronics department generated the most residual income for the company
3. Assume the electronics department is presented with a new investment opportunity that will yield a 15% return on investment. Should the new investment opportunity be accepted
No, New investment opportunity should not be accepted.
ekkarill92 answered 1 year agoRelated Solutions
Required information [The following information applies to the questions displayed below.] Megamart, a retailer of consumer...
Required information
[The following information applies to the questions
displayed below.]
Megamart, a retailer of consumer goods, provides the following
information on two of its departments (each considered an
investment center).
Investment Center
Sales
Income
Average
Invested Assets
Electronics
$
40,000,000
$
2,880,000
$
16,000,000
Sporting goods
20,000,000
2,040,000
12,000,000
Compute profit margin and investment turnover for each
department. Which department generates the most net income per
dollar of sales? Which department is most efficient at generating
sales from average...
[The following information applies to the questions displayed below.] Megamart, a retailer of consumer goods, provides...
[The following information applies to the questions
displayed below.]
Megamart, a retailer of consumer goods, provides the following
information on two of its departments (each considered an
investment center).
Assume a target income level of 10% of average invested assets.
Compute residual income for each department. Which department
generated the most residual income for the company?
Investment Center
Electronics
Sporting Goods
Net income
Target net income
Residual income
Which department is most efficient at
using assets to generate returns for...
Required information [The following information applies to the questions displayed below.] The following are the transactions...
Required information [The following information applies to the
questions displayed below.] The following are the transactions for
the month of July. Units Unit Cost Unit Selling Price July 1
Beginning Inventory 45 $ 10 July 13 Purchase 225 13 July 25 Sold
(100 ) $ 15 July 31 Ending Inventory 170 Calculate cost of goods
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LIFO...
Required information [The following information applies to the questions displayed below.] The following are the transactions...
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displayed below.]
The following are the transactions for the month of July.
Units
Unit Cost
Unit Selling Price
July 1
Beginning Inventory
54
$
10
July 13
Purchase
270
12
July 25
Sold
(100
)
$
16
July 31
Ending Inventory
224
Calculate cost of goods available for sale and ending inventory,
then sales, cost of goods sold, and gross profit, under weighted
average cost. Assume a periodic inventory system is...
Required information [The following information applies to the questions displayed below.] The following information is available...
Required information
[The following
information applies to the questions displayed below.]
The following
information is available for Lock-Tite Company, which produces
special-order security products and uses a job order costing
system.
April 30
May 31
Inventories
Raw
materials
$
28,000
$
52,000
Work in
process
9,000
21,000
Finished
goods
61,000
33,300
Activities and
information for May
Raw materials
purchases (paid with cash)
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Factory payroll
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Other overhead
costs...
Required information [The following information applies to the questions displayed below.] The following information is available...
Required information
[The following information applies to the questions
displayed below.]
The following information is available for Lock-Tite Company, which
produces special-order security products and uses a job order
costing system.
April 30
May 31
Inventories
Raw materials
$
46,000
$
55,000
Work in process
9,000
19,600
Finished goods
62,000
33,300
Activities and information for May
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183,000
Factory payroll (paid with cash)
250,000
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A) Required information [The following information applies to the questions displayed below.] The following information pertains...
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[The following information applies to the questions
displayed below.]
The following information pertains to the inventory of Parvin
Company during Year 2:
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Beginning Inventory
400
units
@
$
30
Apr. 1
Purchased
2,000
units
@
$
35
Oct. 1
Purchased
600
units
@
$
38
During Year 2, Parvin sold 2,700 units of inventory at $90 per unit
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Required information [The following information applies to the questions displayed below.] The following information was reported...
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[The following information applies to the questions displayed
below.]
The following information was reported in the December 31,
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Cash 3,100
Common Stock 1,285
Dividends 20
Equipment 15,930
Income Tax Expense 320
Interest Expense 260
Landing Fees Expense 4,400
Notes Payable 7,015
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Retained Earnings (as of December 31, 2017) 8,060
Salaries...
Required information [The following information applies to the questions displayed below.] The following information is available...
Required information
[The following information applies to the questions
displayed below.]
The following information is available to reconcile Branch
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On July 31, the company’s Cash account has a $25,752 debit
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Required information [The following information applies to the questions displayed below.] The following information is available...
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[The following information applies to the questions
displayed below.]
The following information is available to reconcile Branch
Company’s book balance of cash with its bank statement cash balance
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On July 31, the company’s Cash account has a $24,754 debit
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