Question
In: Accounting
Selected sales and operating data for three divisions of different structural engineering firms are given as...
Selected sales and operating data for three divisions of different structural engineering firms are given as follows:
| Division A | Division B | Division C | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sales | $ | 6,900,000 | $ | 10,900,000 | $ | 10,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average operating assets | $ | 1,725,000 | $ | 5,450,000 | $ | 2,500,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net operating income | $ | 414,000 | $ | 1,090,000 | $ | 325,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Minimum required rate of return | 19.00 | % | 20.00 | % | 16.00 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
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| 3. |
Assume that each division is presented with an investment opportunity that would yield a 21% rate of return. |
| a. |
If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity?
|
Solutions
Expert Solution
| Margin (Net income/sales)% | Turnover (Sales/ average operating assets) | RoI (margin% x turnover) % | |
| Division A | 6 | 4 | 24 |
| Division B | 10 | 2 | 20 |
| Division C | 3.25 | 4 |
13 |
Division A = Reject (24>21)
Division B = Accept (21>20)
Division C = Accept (21>13)
If the decision is to be based on residual income , then all the divisions will accept the investment proposal as it gives more return than the minimum required rate of return of each division.
ekkarill92 answered 2 years agoRelated Solutions
Selected sales and operating data for three divisions of different structural engineering firms are given as...
Selected sales and operating data for three divisions of
different structural engineering firms are given as follows:
Division A
Division B
Division C
Sales
$
12,000,000
$
14,000,000
$
25,000,000
Average operating assets
$
3,000,000
$
7,000,000
$
5,000,000
Net operating income
$
600,000
$
560,000
$
800,000
Minimum required rate of return
14
%
10
%
16
%
Required:
1. Compute the return on investment (ROI) for each division
using the formula stated in terms of margin and turnover....
Selected sales and operating data for three divisions of different structural engineering firms are given as...
Selected sales and operating data for three divisions of
different structural engineering firms are given as follows:
Division A
Division B
Division C
Sales
$
12,600,000
$
35,750,000
$
20,600,000
Average operating assets
$
3,150,000
$
7,150,000
$
5,150,000
Net operating income
$
516,600
$
572,000
$
597,400
Minimum required rate of return
9.00
%
9.50
%
11.60
%
Required:
1. Compute the return on investment (ROI) for each division
using the formula stated in terms of margin and turnover....
Selected sales and operating data for three divisions of different structural engineering firms are given as...
Selected sales and operating data for three divisions of
different structural engineering firms are given as follows:
Division A
Division B
Division C
Sales
$
5,100,000
$
9,100,000
$
8,200,000
Average operating assets
$
1,020,000
$
2,275,000
$
1,640,000
Net operating income
$
214,200
$
746,200
$
118,900
Minimum required rate of return
17.00
%
32.80
%
14.00
%
Required:
1. Compute the return on investment (ROI) for each division
using the formula stated in terms of margin and turnover....
Selected sales and operating data for three divisions of different structural engineering firms are given as...
Selected sales and operating data for three divisions of
different structural engineering firms are given as follows:
Division A Division B Division C Sales $ 12,280,000 $ 35,350,000 $
20,280,000 Average operating assets $ 3,070,000 $ 7,070,000 $
5,070,000 Net operating income $ 601,720 $ 600,950 $ 567,840
Minimum required rate of return 10.00 % 10.50 % 11.20 % Required:
1. Compute the return on investment (ROI) for each division using
the formula stated in terms of margin and turnover....
Selected sales and operating data for three divisions of different structural engineering firms are given as...
Selected sales and operating data for three divisions of
different structural engineering firms are given as follows:
Division A
Division B
Division C
Sales
$
12,360,000
$
28,360,000
$
25,450,000
Average operating assets
$
3,090,000
$
7,090,000
$
5,090,000
Net operating income
$
494,400
$
453,760
$
636,250
Minimum required rate of return
7.00
%
7.50
%
12.50
%
Required:
1. Compute the return on investment (ROI) for each division
using the formula stated in terms of margin and turnover....
Selected sales and operating data for three divisions of different structural engineering firms are given as...
Selected sales and operating data for three divisions of
different structural engineering firms are given as follows:
Division A
Division B
Division C
Sales
$
12,120,000
$
28,120,000
$
20,120,000
Average
operating assets
$
3,030,000
$
7,030,000
$
5,030,000
Net operating
income
$
496,920
$
449,920
$
503,000
Minimum required
rate of return
7.00
%
7.50
%
10.00
%
Required:
1. Compute the return on investment (ROI) for each division
using the formula stated in terms of margin and turnover....
Selected sales and operating data for three divisions of different structural engineering firms are given as...
Selected sales and operating data for three divisions of
different structural engineering firms are given as follows:
Division A
Division B
Division C
Sales
$
16,000,000
$
36,000,000
$
20,800,000
Average operating assets
$
3,200,000
$
7,200,000
$
5,200,000
Net operating income
$
752,000
$
576,000
$
540,800
Minimum required rate of return
9.00
%
9.50
%
10.40
%
Required:
1. Compute the margin, turnover, and return on investment (ROI)
for each division.
2. Compute the residual income (loss) for...
Selected sales and operating data for three divisions of different structural engineering firms are given as...
Selected sales and operating data for three divisions of
different structural engineering firms are
given as follows:
Division A
Division B
Division C
Sales
$
5,600,000
$
9,600,000
$
8,700,000
Average operating assets
$
1,120,000
$
3,200,000
$
1,740,000
Net operating income
$
263,200
$
835,200
$
169,650
Minimum required rate of return
16.00
%
26.10
%
13.00
%
Required:
1.
Compute the return on investment (ROI) for each division using
the formula stated in terms of margin and turnover....
Selected sales and operating data for three divisions of different structural engineering firms are given as...
Selected sales and operating data for three divisions of
different structural engineering firms are given as follows:
Division A
Division B
Division C
Sales
$
6,900,000
$
10,900,000
$
10,000,000
Average operating assets
$
1,725,000
$
5,450,000
$
2,500,000
Net operating income
$
414,000
$
1,090,000
$
325,000
Minimum required rate of
return
19.00
%
20.00
%
16.00
%
Required:
1. Compute the return on investment (ROI) for each division
using the formula stated in terms of margin and...
Selected sales and operating data for three divisions of different structural engineering firms are given as...
Selected sales and operating data for three divisions of
different structural engineering firms are given as follows:
Division
A
Division
B
Division C
Sales
$12,000,000
$14,000,000
$25,000,000
Average operating
assets
$3,000,000
$7,000,000
$5,000,000
Net operating
income
$600,000
$560,000
$800,000
Minimum required rate of
return
14%
10%
16%
Required:
1. Compute the
return on investment (ROI) for each division using the formula
stated in terms of margin and turnover.
ANSWER: Division A margin
=
__________
...
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