All Related Questions of Return On Investment

Q: Haskin Company was founded 40 years ago and now has several manufacturing

Haskin Company was founded 40 years ago and now has several manufacturing plants in the Northeast and Midwest. The evaluation of proposed capital expenditures became increasingly difficult for managem...

Q: The questions in this exercise are based on FedEx Corporation. To

The questions in this exercise are based on FedEx Corporation. To answer the questions youwill need to download FedEx’s Form 10-K for the fiscal year ended May 31, 2005 at www.sec.gov/edgar/searchedga...

Q: Selected sales and operating data for three divisions of different structural engineering

Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Required: 1. Compute the return on investment (ROI) for each division using the f...

Q: Pecs Alley is a regional chain of health clubs. The managers

Pecs Alley is a regional chain of health clubs. The managers of the clubs, who have authority tomake investments as needed, are evaluated based largely on return on investment (ROI). TheSpringfield Cl...

Q: CommercialServices.com Corporation provides business-to-business services on

CommercialServices.com Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below: Sales . . . . . . . . . . . . . . . . . . . . . . . . . ....

Q: A family friend has asked your help in analyzing the operations of

A family friend has asked your help in analyzing the operations of three anonymous companiesoperating in the same service sector industry. Supply the missing data in the table below:

Q: Posters.com is a small Internet retailer of high-quality

Posters.com is a small Internet retailer of high-quality posters. The company has $1,000,000 in operating assets and fixed expenses of $150,000 per year. With this level of operating assets and fixed...

Q: Selected operating data for two divisions of Outback Brewing, Ltd.,

Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below (the currency is the Australian dollar, denoted here as $): Required: 1. Compute the rate of return fo...

Q: Provide the missing data in the following table for a distributor of

Provide the missing data in the following table for a distributor of martial arts products:

Q: “I know headquarters wants us to add that new product line

“I know headquarters wants us to add that new product line,” said Dell Havasi, manager of Billings Company’s Office Products Division. “But I want to see the numbers before I make any move. Ourdivisio...

Q: Meiji Isetan Corp. of Japan has two regional divisions with headquarters

Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow (in millions of yen, denoted by ¥): Required: 1. F...

Q: Alyeska Services Company, a division of a major oil company,

Alyeska Services Company, a division of a major oil company, provides various services tothe operators of the North Slope oil field in Alaska. Data concerning the most recent year appearbelow: Sales ....

Q: Henderson Office Supply is considering a more liberal credit policy to increase

Henderson Office Supply is considering a more liberal credit policy to increase sales, but expects that 8 percent of the new accounts will be uncollectible. Collection costs are 5 percent of new sales...

Q: Global Services is considering a promotional campaign that will increase annual credit

Global Services is considering a promotional campaign that will increase annual credit sales by $400,000. The company will require investments in accounts receivable, inventory, and plant and equipmen...

Q: Although mobile advertising makes up a small percentage of online advertising,

Although mobile advertising makes up a small percentage of online advertising, it is one of the fastest-growing advertising channels. But one obstacle is measuring return on investment in mobile. How...

Q: How does a return on investment pricing objective differ from an objective

How does a return on investment pricing objective differ from an objective of increasing market share?

Q: You must prepare a return on investment analysis for the regional manager

You must prepare a return on investment analysis for the regional manager of Fast & Great Burgers. This growing chain is trying to decide which outlet of two alternatives to open. The first location (...

Q: Megamart, a retailer of consumer goods, provides the following information

Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center). (1) Compute return on investment for each department. Usi...

Q: For a recent year L’Orealreported operating profit of €3,385

For a recent year L’Orealreported operating profit of €3,385 (in millions) for its Cosmetics division. Total assets were €12,888 at the beginning of the year and €13,099 (in millions) at the end of th...

Q: Joan Chris is the Denver district manager of Stale-Mart,

Joan Chris is the Denver district manager of Stale-Mart, an old established chain of more than 100 department stores. Her district contains eight stores in the Denver metropolitan area. One of her sto...

Q: Oaks Auto Supply just acquired a patent on an antifreeze recycler that

Oaks Auto Supply just acquired a patent on an antifreeze recycler that flushes used antifreeze from a car, filters it, removes dissolved chemicals, and then returns it to the automobile without having...

Q: Ohio Building Products (OBP) is considering the launch of a

Ohio Building Products (OBP) is considering the launch of a new product which would require an initial investment in equipment of $30,800 (no investment in working capital is required). The forecast p...

Q: Here is recent financial data on Pisa Construction, Inc.

Here is recent financial data on Pisa Construction, Inc. Pisa has not performed spectacularly to date. However, it wishes to issue new shares to obtain $80,000 to finance expansion into a promising m...

Q: Describe the set of circumstances that could result in net income increasing

Describe the set of circumstances that could result in net income increasing while return on investment (ROI) decreases.

Q: The following exchange occurred just after the finance staff at Diversified Electronics

The following exchange occurred just after the finance staff at Diversified Electronics rejected a capital investment proposal. David Parker (Product Development): I just don’t under...

Q: “Every one of our company’s divisions has a return on investment

“Every one of our company’s divisions has a return on investment in excess of our cost of capital. Our company must be a blockbuster.” Comment on this statement.

Q: Back Mountain Industries (BMI) has two divisions: East and

Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost-of-capital of 15%. Selected financial information (in thousands of dollars) for the first year of business follows: a...

Q: Several years ago, Seville Company acquired Salvador Components. Prior to

Several years ago, Seville Company acquired Salvador Components. Prior to the acquisition, Salvador manufactured and sold automotive components to third-party customers. Since becoming a division of S...

Q: Assume that all of the information is the same as in Integrative

Assume that all of the information is the same as in Integrative Case 15-43, but instead of receiving only one outside bid, Logistics receives two. The new bid is from World Services for $195 per hund...

Q: “We can’t drop our prices below $210 per hundred pounds

“We can’t drop our prices below $210 per hundred pounds,” exclaimed Greg Berman, manager of Forwarders, a division of Custom Freight Systems. &aci...

Q: When the DuPont chemical company first attempted to enter the paint business

When the DuPont chemical company first attempted to enter the paint business, it was not successful. According to a company report, in one year it “lost nearly $500,000 in actual cash in addition to a...

Q: Hector Gaming Company Hector Gaming Company (HGC) is an educational

Hector Gaming Company Hector Gaming Company (HGC) is an educational gaming company specializing in young children’s educational games. HGC has just completed their fourth year of operation. This year...

Q: a. Calculate the approximate annual rate of return on investment of

a. Calculate the approximate annual rate of return on investment of the following cash discount terms: 1. 1/15, n30. 2. 2/10, n60. 3. 1/10, n90. b. Which of these terms, if any, is not likely to be a...

Q: Annual credit sales of Nadak Co. total $340 million.

Annual credit sales of Nadak Co. total $340 million. The firm gives a 2% cash discount for payment within 10 days of the invoice date; 90% of Nadak’s accounts receivable are paid within the discount p...

Q: Green Company has prepared the following information for three of its divisions

Green Company has prepared the following information for three of its divisions: Required (a) Compute each division’s return on investment and residual income, assuming a 10% cost o...

Q: Eta Company would like to examine the sales margin and asset components

Eta Company would like to examine the sales margin and asset components of return on investment for three of its divisions and has accordingly prepared the following information: Required (a) Compute...

Q: Division Q’s current turnover is 2 and its return on sales ratio

Division Q’s current turnover is 2 and its return on sales ratio is 0.8. The division is considering a sales promotion that would increase its current return on sales ratio by 20%, but decrease its tu...

Q: A business whose investors require a return on investment of 8%

A business whose investors require a return on investment of 8% reports an income of $1 million on an investment of $20 million. What is the residual income for this business?

Q: Strathcona Paper rewards its managers on the basis of the after-

Strathcona Paper rewards its managers on the basis of the after-tax return on investment of the assets that they manage—the higher the reported return on investment, the higher the reward. The company...

Q: You are the controller of a chain of dry-cleaning establishments

You are the controller of a chain of dry-cleaning establishments. You are computing the return on investment for each outlet. Outlet A, located in a city core, reported a net profit of $130,000. The l...

Q: Michelle Gutierrez, manager of the Components Division of FX Corporation,

Michelle Gutierrez, manager of the Components Division of FX Corporation, is considering a new investment for her division. The division has an investment base of $4,000,000 and operating income of $6...

Q: The Newburg Flyers operate a major sports franchise from a building in

The Newburg Flyers operate a major sports franchise from a building in downtown Newburg. The building was built in 1940 at a cost of $5,000,000 and is fully depreciated so that it is shown on the comp...

Q: Preston Plastics is about to wrap up its capital budgeting cycle,

Preston Plastics is about to wrap up its capital budgeting cycle, and department managers across the company have submitted 500 capital project requests for consideration in the next round of funding....

Q: Paula Boothe, president of the Armange Corporation, has mandated a

Paula Boothe, president of the Armange Corporation, has mandated a minimum 10% return on investment for any project undertaken by the company. Given the company’s decentralization, Paula leaves all in...

Q: Joyner Pickled Pepper Company produces pickled jalapeno pepper relish. Selected results

Joyner Pickled Pepper Company produces pickled jalapeno pepper relish. Selected results from the most current year were as follows: Sales revenue……………….$3,375,000 Operating income………………540,000 Averag...

Q: Sanders Siding produces and sells two products—aluminum and vinyl.

Sanders Siding produces and sells two products—aluminum and vinyl. Each of these products is made in a dedicated manufacturing facility, and the product line managers are evaluated b...

Q: Hannalinn Corporation operates three divisions—Archer, Barrett, and Corvell

Hannalinn Corporation operates three divisions—Archer, Barrett, and Corvell. Division managers are evaluated based on the division’s return on investment, and histo...

Q: Fun Times Entertainment Corporation (FTEC), a subsidiary of New Age

Fun Times Entertainment Corporation (FTEC), a subsidiary of New Age Industries, manufactures go-carts and other recreational vehicles. Family recreational centers that feature not only go-cart tracks...

Q: The following data pertain to Pensacola Division’s most recent year of operations

The following data pertain to Pensacola Division’s most recent year of operations. Income .............................................................................. $ 10,000,000 Sales revenue .......

Q: Select one of the following companies (or any company of your

Select one of the following companies (or any company of your choosing) and use the Internet to explore the company’s most recent annual report. American Airlines (www.americanair.com) Deere and Compa...

Q: Suburban Lifestyles, Inc., has manufactured prefabricated houses for over 20

Suburban Lifestyles, Inc., has manufactured prefabricated houses for over 20 years. T h e houses are constructed in sections to be assembled on customers’ lots. Suburban Lifestyles e...

Q: Hoosier Industries manufactures a variety of household products. Roy Washburn,

Hoosier Industries manufactures a variety of household products. Roy Washburn, head of the company’s Hardware Division, has just completed a miserable nine months. “...

Q: SFAC No. 5 states that the concept of capital maintenance is

SFAC No. 5 states that the concept of capital maintenance is critical in distinguishing an enterprise’s return on investment from return of its investment. Two concepts of capital maintenance are disc...

Q: Annual credit sales of Nadak Co. total $340 million.

Annual credit sales of Nadak Co. total $340 million. The firm gives a 2% cash discount for payment within 10 days of the invoice date; 90% of Nadak’s accounts receivable are paid within the discount p...

Q: a. Calculate the approximate annual rate of return on investment of

a. Calculate the approximate annual rate of return on investment of the following cash discount terms: 1. 1/15, n30. 2. 2/10, n60. 3. 1/10, n90. b. Which of these terms, if any, is not likely to be a...

Q: Indicate the effect that each transaction/event listed here will have

Indicate the effect that each transaction/event listed here will have on the financial ratio listed opposite it, and provide an explanation for your answer. Use + for increase, - for decrease, and (NE...

Q: An investor has asked for your help with the following time value

An investor has asked for your help with the following time value of money applications. Use the appropriate factors from Table 6-4 or Table 6-5 to answer the following questions. Table 6-4: Requir...

Q: Use the appropriate factors from Table 6-4 or Table 6

Use the appropriate factors from Table 6-4 or Table 6-5 to answer the following questions. Table 6-4: Required: a. Staley Co.’s common stock is expected to have a dividend of $6 p...

Q: National Leasing is evaluating the cost of capital to use in its

National Leasing is evaluating the cost of capital to use in its capital budgeting process. Over the recent past, the company has averaged a return on equity of 12% and a return on investment of 9%. T...

Q: The Good wrench Garage is considering an investment in a new tune

The Good wrench Garage is considering an investment in a new tune-up computer. The cost of the computer is $48,000. A cost analyst has calculated the discounted present value of the expected cash flow...

Q: How is return on investment different from return on total equity?

How is return on investment different from return on total equity? How does return on total equity differ from return on common equity?

Q: Refer to the data given in Exercise 1. Data

Refer to the data given in Exercise 1. Data from preceding Exercise 1: Jefferson County’s Board of Representatives is considering the purchase of a site for a new sanitary landfill....

Q: One item is omitted from each of the following computations of the

One item is omitted from each of the following computations of the return on investment: Determine the missing items, identifying each by the appropriate letter.

Q: Cash Company has income from operations of $112,500,

Cash Company has income from operations of $112,500, invested assets of $750,000, and sales of $1,875,000. Use the DuPont formula to compute the return on investment and show (a) the profit margin,...

Q: Briggs Company has income from operations of $36,000,

Briggs Company has income from operations of $36,000, invested assets of $180,000, and sales of $720,000. Use the DuPont formula to compute the return on investment and show (a) the profit margin, (...

Q: How does using the return on investment facilitate comparability between divisions of

How does using the return on investment facilitate comparability between divisions of decentralized companies?

Q: The condensed income statement for the Consumer Products Division of Fargo Industries

The condensed income statement for the Consumer Products Division of Fargo Industries Inc. is as follows (assuming no service department charges): The manager of the Consumer Products Division is con...

Q: The Walt Disney Company has four profitable business segments, described as

The Walt Disney Company has four profitable business segments, described as follows: • Media Networks: The ABC television and radio network, Disney channel, ESPN, A&E, E!, and Di...

Q: H&R Block Inc. provides tax preparation services throughout the

H&R Block Inc. provides tax preparation services throughout the United States and other parts of the world. These services are provided through two segments: company-owned offices and franchised o...

Q: The Whole Life Baked Goods Company is a diversified food company that

The Whole Life Baked Goods Company is a diversified food company that specializes in all natural foods. The company has three operating divisions organized as investment centers. Condensed data taken...

Q: A condensed income statement for the Commercial Division of Maxell Manufacturing Inc

A condensed income statement for the Commercial Division of Maxell Manufacturing Inc. for the year ended December 31 is as follows: Assume that the Commercial Division received no charges from servic...

Q: The vice president of operations of Pavone Company is evaluating the performance

The vice president of operations of Pavone Company is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed income statement data for the past year...

Q: The income from operations and the amount of invested assets in each

The income from operations and the amount of invested assets in each division of Beck Industries are as follows: a. Compute the return on investment for each division. b. Which division is the most...

Q: If sales and average operating assets for Year 2 are identical to

If sales and average operating assets for Year 2 are identical to their values in Year 1, yet operating income is higher, Year 2 return on investment (compared with Year 1 ROI) will a. decrease. b. i...

Q: Consider the following data, which relate to the two divisions of

Consider the following data, which relate to the two divisions of McIntyre Products: Required: Compare the two divisions in terms of return on investment and residual income. In the past year, which...

Q: Sally Omar is the manager of the office products division of Wallace

Sally Omar is the manager of the office products division of Wallace Enterprises. In this position, her annual bonus is based on an appraisal of return on investment (ROI) measured as Division income...

Q: Norton Weymer & Collins, LLP, a local accounting firm,

Norton Weymer & Collins, LLP, a local accounting firm, has a formal budgeting system. The firm has five partners, two managers, four seniors, two secretaries, and two bookkeepers. The budgeting proces...

Q: Corner Brook Furniture Co. makes bookstands and expects sales and collections

Corner Brook Furniture Co. makes bookstands and expects sales and collections for the first three months of 2011 to be as follows: The December 31, 2010, balance sheet revealed the following selected...

Q: Alyeska Services Company, a division of a major oil company,

Alyeska Services Company, a division of a major oil company, provides various services to the operators of the North Slope oil field in Alaska. Data concerning the most recent year appear below: Sales...

Q: Meiji Isetan Corp. of Japan has two regional divisions with headquarters

Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow (in millions of yen, denoted by ¥): Required: 1....

Q: Selected operating data for two divisions of Outback Brewing, Ltd.,

Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below (the currency is the Australian dollar, denoted here as $): Required: 1. Compute the rate of return f...

Q: Provide the missing data in the following table for a distributor of

Provide the missing data in the following table for a distributor of martial arts products:

Q: Selected sales and operating data for three divisions of different structural engineering

Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Required: 1. Compute the return on investment (ROI) for each division using the...

Q: Pecs Alley is a regional chain of health clubs. The managers

Pecs Alley is a regional chain of health clubs. The managers of the clubs, who have authority to make investments as needed, are evaluated based largely on return on investment (ROI). The Springfield...

Q: CommercialServices.com Corporation provides business-to-business services on

CommercialServices.com Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below: Sales ......................................................

Q: A family friend has asked your help in analyzing the operations of

A family friend has asked your help in analyzing the operations of three anonymous companies operating in the same service sector industry. Supply the missing data in the table below:

Q: Posters.com is a small Internet retailer of high-quality

Posters.com is a small Internet retailer of high-quality posters. The company has $1,000,000 in operating assets and fixed expenses of $150,000 per year. With this level of operating assets and fixed...

Q: “I know headquarters wants us to add that new product line

“I know headquarters wants us to add that new product line,” said Dell Havasi, manager of Billings Company’s Office Products Division. “But I want to see the numbers before I make any move. Our divisi...

Q: Financial data for Joel de Paris, Inc., for last year

Financial data for Joel de Paris, Inc., for last year follow: The company paid dividends of $15,000 last year. The “Investment in Buisson, S.A.” on the balance s...

Q: The contribution format income statement for Huerra Company for last year is

The contribution format income statement for Huerra Company for last year is given below: The company had average operating assets of $2,000,000 during the year. Required: 1. Compute the company&ac...

Q: All eight companies in the aerospace industry were surveyed as to their

All eight companies in the aerospace industry were surveyed as to their return on investment last year. The results are: 10.6%, 12.6%, 14.8%, 18.2%, 12.0%, 14.8%, 12.2%, and 15.6%. Calculate the (a) R...

Q: The sample of eight companies in the aerospace industry, referred to

The sample of eight companies in the aerospace industry, referred to in Exercise 38, was surveyed as to their return on investment last year. The results are 10.6, 12.6, 14.8, 18.2, 12.0, 14.8, 12.2,...

Q: Imelda Sanchez, manager of the Arias Division of Poncé Chemical,

Imelda Sanchez, manager of the Arias Division of Poncé Chemical, is evaluated based on the division’s return on investment and residual income. Near the end of November 2010, she was reviewing the div...

Q: Morton Industrial produces stamping machinery for manufacturers. In 2009, the

Morton Industrial produces stamping machinery for manufacturers. In 2009, the company expanded vertically by acquiring a supplier, Lancaster Company. Lancaster is now operated as a divisional investme...

Q: Rowling Inc. is a decentralized company, and each investment center

Rowling Inc. is a decentralized company, and each investment center has its own sales force and production facilities. Top management uses return on investment (income divided by assets) for performan...

Q: Family Fun Vehicle Co. (FFV), a subsidiary of Drummondville

Family Fun Vehicle Co. (FFV), a subsidiary of Drummondville Automotive, manufactures go-carts and other recreational vehicles. Family recreational centers that feature go-cart tracks, miniature golf,...

Q: What is residual income, and how is it used to measure

What is residual income, and how is it used to measure divisional performance? How is it similar to, and different from, the return on investment measure? How is residual income similar to, and differ...

Q: Data for the three autonomous divisions of Arizona Mining, Inc.

Data for the three autonomous divisions of Arizona Mining, Inc. for fiscal year 2010 follow. Compute the return on investment for each division.

Q: Match each of the following ratios with the formula used to compute

Match each of the following ratios with the formula used to compute it:

Q: Mick Garcia, a certified financial planner (CFP), has been

Mick Garcia, a certified financial planner (CFP), has been asked by a client to invest $250,000. This money may be placed in stocks, bonds, or a mutual fund in real estate. The expected return on inve...

Q: The Norsk Division of Gridiron Concepts Inc. has been experiencing revenue

The Norsk Division of Gridiron Concepts Inc. has been experiencing revenue and profit growth during the years 20Y6–20Y8. The divisional income statements follow: There are no service...

Q: Last Resort Industries Inc. is a privately held diversified company with

Last Resort Industries Inc. is a privately held diversified company with five separate divisions organized as investment centers. A condensed income statement for the Specialty Products Division for t...

Q: E.F. Lynch Company is a diversified investment company with

E.F. Lynch Company is a diversified investment company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended J...

Q: A condensed income statement for the Electronics Division of Gihbli Industries Inc

A condensed income statement for the Electronics Division of Gihbli Industries Inc. for the year ended December 31 is as follows: Assume that the Electronics Division received no charges from service...

Q: The vice president of operations of Free Ride Bike Company is evaluating

The vice president of operations of Free Ride Bike Company is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed income statement data for the p...

Q: Wonder Line (WL) operates a megastore featuring sports merchandise.

Wonder Line (WL) operates a megastore featuring sports merchandise. It uses an EOQ decision model to make inventory decisions. It is now considering inventory decisions for its Los Angeles Galaxy socc...

Q: Excellent Motor Company makes electric cars and has two products, the

Excellent Motor Company makes electric cars and has two products, the Simplegreen and the Excellentgreen. To produce the Simplegreen, Excellent Motor employed assets of $10,500,000 at the beginning of...

Q: Performance Auto Company operates a new car division (that sells high

Performance Auto Company operates a new car division (that sells high- performance sports cars) and a performance parts division (that sells performance-improvement parts for family cars). Some divisi...

Q: The Seaside Corporation manufactures similar products in the United States and Norway

The Seaside Corporation manufactures similar products in the United States and Norway. The U.S. and Norwegian operations are organized as decentralized divisions. The following information is availabl...

Q: News Report Group has two major divisions: Print and Internet.

News Report Group has two major divisions: Print and Internet. Summary financial data (in millions) for 2016 and 2017 are as follows: The two division managers’ annual bonuses are b...

Q: The following data refer to Clear Panes, a division of Global

The following data refer to Clear Panes, a division of Global Corporation. Clear Panes makes and sells residential windows that sell for $150 each. Clear Panes expects sales of 150,000 units in 2017....

Q: The Gibson Corporation is a manufacturing company that uses automatic stamping machines

The Gibson Corporation is a manufacturing company that uses automatic stamping machines to manufacture garage doors from rolled sheets of raw steel. Gibson’s inventory of raw steel a...

Q: Peach Computer Co. outsources the production of motherboards for its computers

Peach Computer Co. outsources the production of motherboards for its computers. It is currently deciding which of two suppliers to use: Alpha or Beta. Due to differences in the product failure rates i...

Q: Jason Brady is the managing partner of a business that has just

Jason Brady is the managing partner of a business that has just finished building a 60-room motel. Brady anticipates that he will rent these rooms for 15,000 nights next year (or 15,000 room-nights)....

Q: Because resources for social programs and public-sector investment projects come

Because resources for social programs and public-sector investment projects come from private-sector consumption and/or investment, economists typically advocate the use of a social rate of discount t...

Q: Identify each of the following statements as true or false, and

Identify each of the following statements as true or false, and explain your answers. a. Information costs both increase the marginal cost of capital and reduce the internal rate of return on investme...

Q: Hathaway-Ross Instruments, Inc., manufactures an innovative piece of

Hathaway-Ross Instruments, Inc., manufactures an innovative piece of diagnostic equipment used in medical laboratories and hospitals. OSHA has determined that additional safety precautions are necessa...

Q: Eastevan Company calculated its return on investment as 10 percent. Sales

Eastevan Company calculated its return on investment as 10 percent. Sales are now $300,000, and the amount of total operating assets is $320,000. Required: a. If expenses are reduced by $28,000 and s...

Q: Sorrento Corporation’s balance sheet indicates that the company has $500,

Sorrento Corporation’s balance sheet indicates that the company has $500,000 invested in operating assets. During 2018, Sorrento earned operating income of $50,000 on $1,000,000 of sales. Required: a...

Q: The manager of the Cranston Division of Wynn Manufacturing Corporation is currently

The manager of the Cranston Division of Wynn Manufacturing Corporation is currently producing a 20 percent return on invested capital. Wynn’s desired rate of return is 16 percent. The Cranston Divisio...

Q: Carmen Douglas claims that her company’s performance evaluation system is unfair.

Carmen Douglas claims that her company’s performance evaluation system is unfair. Her company uses return on investment (ROI) to evaluate performance. Ms. Douglas says that even though her ROI is lowe...

Q: A study by the Harvard Business School has shown that e-

A study by the Harvard Business School has shown that e-mail marketing is much more effective than traditional direct mail in that it provides a much greater return on investment (ROI) Explain some of...

Q: The condensed income statement for the International Division of Valgenti Inc.

The condensed income statement for the International Division of Valgenti Inc. is as follows (assuming no service department charges): Sales ………………………………. $24,000,000 Cost of goods sold ……………. (14,10...

Q: The Walt Disney Company has four major sectors, described as follows

The Walt Disney Company has four major sectors, described as follows: • Media Networks: The ABC television and radio network, Disney channel, ESPN, A&E, E! and Disney.com. â...

Q: The following table presents various rates of return on investment and residual

The following table presents various rates of return on investment and residual incomes: Determine the missing items, identifying each item by the appropriate letter.

Q: Data for the California, Midwest, Northwest, and Texas divisions

Data for the California, Midwest, Northwest, and Texas divisions of Firefly Industries are as follows: a. Determine the missing items, identifying each by the letters (a) through (l)....

Q: High Country Foods Inc. is a diversified food products company with

High Country Foods Inc. is a diversified food products company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisio...

Q: A condensed income statement for the Jet Ski Division of Amazing Rides

A condensed income statement for the Jet Ski Division of Amazing Rides Inc. for the year ended December 31, 20Y2, is as follows: Assume that the Jet Ski Division received no charges from service dep...

Q: The vice president of operations of Moab Bike Company is evaluating the

The vice president of operations of Moab Bike Company is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed income statement data for the past y...

Q: The three divisions of Dixie Foods are Cereal, Produce, and

The three divisions of Dixie Foods are Cereal, Produce, and Snacks. The divisions are structured as investment centers. The following responsibility reports were prepared for the three divisions for t...

Q: The Laser Division of FOX Technologies Inc. has been experiencing revenue

The Laser Division of FOX Technologies Inc. has been experiencing revenue and profit growth during the years 20Y6–20Y8. The divisional income statements are provided b...

Q: Modern Living Inc. is a privately held diversified company with five

Modern Living Inc. is a privately held diversified company with five separate divisions organized as investment centers. A condensed income statement for the Patio Divisi...

Q: One item is omitted from each of the following computations of the

One item is omitted from each of the following computations of the return on investment: Determine the missing items, identifying each by the appropriate letter.

Q: The operating income and the amount of invested assets in each division

The operating income and the amount of invested assets in each division of Otte Industries are as follows: a. Compute the return on investment for each division. b. Which division is the most profit...

Q: Based on the data in Exercise 14-10, assume that

Based on the data in Exercise 14-10, assume that management has established a 10% minimum acceptable rate of return for invested assets. a. Determine the residual income for each division. b. Which di...

Q: A ratio that is becoming more widely used is return on investment

A ratio that is becoming more widely used is return on investment. Return on investment is calculated as net income divided by long- term liabilities plus equity. What do you think return on investmen...

Q: The following financial information is for A. Galler Company for 2011

The following financial information is for A. Galler Company for 2011, 2010, and 2009: Required: a. For 2011, 2010, and 2009, determine the following: 1. Return on assets (using end-of-year total as...

Q: Day Ko Incorporated presented the following comparative income statements for 2011 and

Day Ko Incorporated presented the following comparative income statements for 2011 and 2010: Required: a. How did 2011 net sales compare with 2010? b. How did 2011 net earnings compare with 2010? c. C...

Q: Martin Company uses the absorption costing approach to cost-plus pricing

Martin Company uses the absorption costing approach to cost-plus pricing.It is considering the introduction of a new product. To determine a selling price, the company has gathered the following infor...

Q: Derrick Iverson is a divisional manager for Holston Company. His annual

Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division’s return on investment (ROI), which has been above 20% each...

Q: Casey Nelson is a divisional manager for Pigeon Company. His annual

Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division’s return on investment (ROI), which has been above 20% each of t...

Q: Lou Barlow, a divisional manager for Sage Company, has an

Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his divisionâ...

Q: Westerville Company reported the following results from last year’s operations:

Westerville Company reported the following results from last year’s operations: Sales .................................................................$1,000,000 Variable expenses ......................

Q: Alpha and Beta are divisions within the same company. The managers

Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their own division’s return on investment (ROI). Assume the following info...

Q: Weller Industries is a decentralized organization with six divisions. The company’s

Weller Industries is a decentralized organization with six divisions. The company’s Electrical Division produces a variety of electrical items, including an X52 electrical fitting. The Electrical Divi...

Q: Currington Company wants to use absorption cost-plus pricing to set

Currington Company wants to use absorption cost-plus pricing to set the selling price on a newly remodeled product. The company plans to invest $150,000 in operating assets to produce and sell 12,000...

Q: National Restaurant Supply, Inc., sells restaurant equipment and supplies throughout

National Restaurant Supply, Inc., sells restaurant equipment and supplies throughout most of the United States. Management is considering adding a machine that makes sorbet to its line of ice cream ma...

Q: Messina Company wants to use absorption cost-plus pricing to establish

Messina Company wants to use absorption cost-plus pricing to establish the selling price for a new product. The company plans to invest $650,000 in operating assets that provide the capacity to make 3...

Q: Wilderness Products, Inc., has designed a self-inflating sleeping

Wilderness Products, Inc., has designed a self-inflating sleeping pad for use by backpackers and campers. The following information is available about the new product: a. An investment of $1,350,000 w...

Q: Aldean Company wants to use absorption cost-plus pricing to set

Aldean Company wants to use absorption cost-plus pricing to set the selling price on a new product. The company plans to invest $200,000 in operating assets to produce and sell 16,000 units. Its requi...

Q: The Excel worksheet form that appears below is to be used to

The Excel worksheet form that appears below is to be used to recreate the Review Problem pertaining to the Magnetic Imaging Division of Medical Diagnostics, Inc.Download the workbook containing this f...

Q: Fitness Fanatics is a regional chain of health clubs. The managers

Fitness Fanatics is a regional chain of health clubs. The managers of the clubs, who have authority to make investments as needed, are evaluated based largely on return on investment (ROI). The compan...

Q: Martin Company uses the absorption costing approach to cost-plus pricing

Martin Company uses the absorption costing approach to cost-plus pricing.It is considering the introduction of a new product. To determine a selling price, the company has gathered the following infor...

Q: Two contingency tables below show return on investment (ROI) and

Two contingency tables below show return on investment (ROI) and percent of sales growth over the previous 5 years for 85 U.S. firms. ROI is defined as percentage of return on a combination of stockho...

Q: ZNet Co. is a web-based retail company. The

ZNet Co. is a web-based retail company. The company reports the following for 2015. The company’s CEO believes that sales for 2016 will increase by 20%, and both profit margin (%)...

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You must prepare a return on investment analysis for the regional manager of Fast & Great Burgers. This growing chain is trying to decide which outlet of two alternatives to open. The first location (...

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Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center). 1. Compute return on investment for each department. Usin...

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Refer to information in QS 24-9. Assume a target income of 12% of average invested assets. Compute residual income for each division. Information from QS 24-9:

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Fill in the blanks in the schedule below for two separate investment centers A and B. Round answers to the nearest whole percent.

Q: Compute return on investment for each of the divisions below (each

Compute return on investment for each of the divisions below (each is an investment center). Comment on the relative performance of each investment center.

Q: For a recent year L’Oréal reported operating profit of €3,

For a recent year L’Oréal reported operating profit of €3,385 (in millions) for its cosmetics division. Total assets were €12,888 (in millions) at the beginning of the year and €13,099 (in millions) a...

Q: The West Division of Nieto Company reported the following data for the

The West Division of Nieto Company reported the following data for the current year. Sales …………………………………..$3,000,000 Variable costs ………………………..1,980,000 Controllable fixed costs ……………600,000 Average...

Q: The Pletcher Transportation Company uses a responsibility reporting system to measure the

The Pletcher Transportation Company uses a responsibility reporting system to measure the performance of its three investment centers: Planes, Taxis, and Limos. Segment performance is measured using a...

Q: Presented below is selected information for three regional divisions of Medina Company

Presented below is selected information for three regional divisions of Medina Company. Instructions: (a) Compute the return on investment for each division. (b) Compute the residual income for each...

Q: Presented below is selected financial information for two divisions of Yono Brewing

Presented below is selected financial information for two divisions of Yono Brewing. Instructions: Supply the missing information for the lettered items.

Q: Data for the investment centers for Kaspar Company are given in BE22

Data for the investment centers for Kaspar Company are given in BE22-9. The centers expect the following changes in the next year: (I) increase sales 15%; (II) decrease costs $400,000; (III) decrea...

Q: Presented below is information related to the Southern Division of Lumber,

Presented below is information related to the Southern Division of Lumber, Inc. Contribution margin …………………………………………. $1,200,000 Controllable margin ……………………………………………$ 800,000 Average operating asset...

Q: Delby Industries has manufactured prefabricated houses for over 20 years. The

Delby Industries has manufactured prefabricated houses for over 20 years. The houses are constructed in sections to be assembled on customers’ lots. Delby expanded into the precut housing market when...

Q: For its three investment centers, Kaspar Company accumulates the following data

For its three investment centers, Kaspar Company accumulates the following data Compute the return on investment (ROI) for each center.

Q: The service division of Raney Industries reported the following results for 2013

The service division of Raney Industries reported the following results for 2013. Sales ………………………………………………………$500,000 Variable costs ……………………………………………300,000 Controllable fixed costs ………………………………. 75...

Q: Voorhees, Inc. reports the following financial information.

Voorhees, Inc. reports the following financial information. Average operating assets …………………………………. $3,000,000 Controllable margin ……………………………………………$ 660,000 Minimum rate of return ………………………………………………...

Q: According to Exhibit 13.8 , the top-three budget

According to Exhibit 13.8 , the top-three budget goals for divisional managers of Japanese companies are sales volume, net profit, and production cost, in that order, whereas those of U.S. companies a...

Q: In Problem 13, suppose the call money rate is 5 percent

In Problem 13, suppose the call money rate is 5 percent and you are charged a 1.5 percent premium over this rate. Calculate your return on investment for each of the following share prices one year la...

Q: K. Johnson, Inc.’s managers want to evaluate the

K. Johnson, Inc.’s managers want to evaluate the firm’s prior-year performance in terms of its contribution to shareholder value. This past year, the firm earned an operating return on investment of 1...

Q: Leslie Blandings, division manager of Audiotech Inc., was debating the

Leslie Blandings, division manager of Audiotech Inc., was debating the merits of a new product—a weather radio that would put out a warning if the county in which the listener lived were under a sever...

Q: Leslie Blandings, division manager of Audiotech Inc., was debating the

Leslie Blandings, division manager of Audiotech Inc., was debating the merits of a new product—a weather radio that would put out a warning if the county in which the listener lived were under a sever...

Q: In 2012, Duke Energy, a large utility company with its

In 2012, Duke Energy, a large utility company with its headquarters in North Carolina, completed its $32 billion acquisition of Progress Energy. To get an idea of the size of this deal, in 2011 Duke E...

Q: What is the difference between return on investment and return on equity

What is the difference between return on investment and return on equity?

Q: The retirement planning model described in Chapter 11 (Example 11.11)

The retirement planning model described in Chapter 11 (Example 11.11) assumes that the data in rows 5–8 of the spreadsheet are the same for each year of the model. Modify the spreadsheet to allow the...

Q: Fan Base (FB) operates a megastore featuring sports merchandise.

Fan Base (FB) operates a megastore featuring sports merchandise. It uses an EOQ decision model to make inventory decisions. It is now considering inventory decisions for its soccer jerseys product lin...

Q: Athletic Textiles (AT) manufactures the soccer jerseys that Fan Base

Athletic Textiles (AT) manufactures the soccer jerseys that Fan Base (FB) sells to its customers. AT has recently installed computer software that enables its customers to conduct “one-stop” purchasin...

Q: The Margro Corporation is an automotive supplier that uses automatic turning machines

The Margro Corporation is an automotive supplier that uses automatic turning machines to manufacture precision parts from steel bars. Margro’s inventory of raw steel averages $600,00...

Q: Cow Spot Computer Co. outsources the production of motherboards for its

Cow Spot Computer Co. outsources the production of motherboards for its computers. It has narrowed down its choice of suppliers to two companies: Maji and Induk. Maji is an older company with a good r...

Q: Copeland Sporting Goods is evaluating two suppliers of footballs: Big Red

Copeland Sporting Goods is evaluating two suppliers of footballs: Big Red and Quality Sports. Pertinent information about each potential supplier follows: Required: Calculate the relevant costs of p...

Q: Waterbury, Inc. manufactures and sells RF17, a specialty raft

Waterbury, Inc. manufactures and sells RF17, a specialty raft used for whitewater rafting. In 2015, it reported the following: Required: 1. What was the selling price in 2015? What was the percentag...

Q: John Beck is the managing partner of a business that has just

John Beck is the managing partner of a business that has just finished building a 60-room motel. Beck anticipates that he will rent these rooms for 16,000 nights next year (or 16,000 room-nights). All...

Q: Screen Games (SG) distributes DVD games to retail stores and

Screen Games (SG) distributes DVD games to retail stores and game parlours. It has a simple business model: Order the DVD games, catalogue the games on SG’s website, deliver and prov...

Q: A number of terms are listed below: /

A number of terms are listed below: Select the terms from the above list to complete the following sentences. The goal of ________________ is to provide capacity in a planned and orderly manner that...

Q: In 2015, the Mandarin Division of Key Products Corporation generated an

In 2015, the Mandarin Division of Key Products Corporation generated an operating income of $3,000,000 from $20,000,000 of sales revenues and using assets worth $15,000,000. Mandarin managers are eval...

Q: A number of terms are listed below: /

A number of terms are listed below: Required: Select the terms from the above list to complete the following sentences. Governance, or the management stewardship of assets management does not own, a...

Q: Ohms Motor Company makes electric cars and has only two products,

Ohms Motor Company makes electric cars and has only two products, the Simplegreen and the Superiorgreen. To produce the Simplegreen, Ohms Motor employed assets of $13,500,000 at the beginning of the p...

Q: Performance Auto Company operates a New Car Division (that sells high

Performance Auto Company operates a New Car Division (that sells high-performance sports cars) and a Performance Parts Division (that sells performance improvement parts for family cars). Some divisio...

Q: The Grandlund Corporation manufactures similar products in Canada and Norway. The

The Grandlund Corporation manufactures similar products in Canada and Norway. The Canadian and Norwegian operations are organized as decentralized divisions. The following information is available for...

Q: Lada Manufacturing makes fashion products and competes on the basis of quality

Lada Manufacturing makes fashion products and competes on the basis of quality and leading-edge designs. The company has $3,000,000 invested in assets in its clothing manufacturing division. After-tax...

Q: The Dexter Division of AMCO sells car batteries. AMCO’s corporate management

The Dexter Division of AMCO sells car batteries. AMCO’s corporate management gives Dexter management considerable operating and investment autonomy in running the division. AMCO is considering how it...

Q: Mark’s division has been judged on the basis of its profit and

Mark’s division has been judged on the basis of its profit and return on investment. Top management has been working to gain effective results from a policy of decentralizing responsibility for all de...

Q: Green News Group has two major divisions: Print and Internet.

Green News Group has two major divisions: Print and Internet. Summary financial data (in millions) for 2014 and 2015 are as follows: he two division managers’ annual bonuses are ba...

Q: When the Smith & Bain Company formed three divisions a year ago

When the Smith & Bain Company formed three divisions a year ago, the president told the division managers that an annual bonus would be paid to the most profitable division. However, absolute divi...

Q: Coventry Inc. is a diversified multidivisional corporation. One of its

Coventry Inc. is a diversified multidivisional corporation. One of its business units manufactures and sells industrial pumps. Coventry’s corporate management gives Industrial Pumps management conside...

Q: As a way to incent competition between divisions, the president of

As a way to incent competition between divisions, the president of Industrial Products told the division managers that a quarterly bonus would be paid only to the most profitable division. However, ab...

Q: Gatwick Ltd. has after tax profits (net income) of

Gatwick Ltd. has after tax profits (net income) of $500,000 and no debt. The owners have a $6 million investment in the business. If they borrow $2 million at 10% and use it to retire stock, how wil...

Q: The accountant of your business has recently been taken ill through overwork

The accountant of your business has recently been taken ill through overwork. In his absence his assistant has prepared some calculations of the profitability of a project, which are to be discussed s...

Q: Like many married couples, Damian and Brandi Woodson are trying their

Like many married couples, Damian and Brandi Woodson are trying their best to save for two important investment objectives: (1) an education fund to put their two children through college; and (2) a r...

Q: Use Worksheet 11.1 Alison Conroy is a young career woman

Use Worksheet 11.1 Alison Conroy is a young career woman who’s now employed as the managing editor of a well-known business journal. Although she thoroughly enjoys her job and the pe...

Q: Firm L has $500,000 to invest and is considering

Firm L has $500,000 to invest and is considering two alternatives. Investment A would pay 6 percent ($30,000 annual before-tax cash flow). Investment B would pay 4.8 percent ($24,000 annual before tax...

Q: At the beginning of the year, Mr. L put $

At the beginning of the year, Mr. L put $50,000 cash into Investment X. At the end of the year, he received a check for $2,800, representing his annual return on the investment. Mr. L’s marginal tax r...

Q: 1. In a hospitality business, a cost center is best

1. In a hospitality business, a cost center is best defined as a A. unit or department that generates costs, but no revenues or profits B. department in charge of product purchases C. unit responsibl...

Q: Presented below is selected financial information for two divisions of Samberg Brewing

Presented below is selected financial information for two divisions of Samberg Brewing. Instructions Supply the missing information for the lettered items.

Q: The service division of Raney Industries reported the following results for 2020

The service division of Raney Industries reported the following results for 2020. Sales ………………………………. $500,000 Variable costs …………………… 300,000 Controllable fixed costs ……… 75,000 Average operating as...

Q: Data for the investment centers for Gerrard Company are given in BE25

Data for the investment centers for Gerrard Company are given in BE25.9. The centers expect the following changes in the next year: (I) increase sales 15%, (II) decrease costs $400,000, and (III) de...

Q: Sterling, Inc. reports the following financial information for its sports

Sterling, Inc. reports the following financial information for its sports clothing segment. Average operating assets ………………………………. $3,000,000 Controllable margin ………………………………………… $ 630,000 Minimum ra...

Q: For its three investment centers, Gerrard Company accumulates the following data

For its three investment centers, Gerrard Company accumulates the following data: Compute the return on investment (ROI) for each center.

Q: The South Division of Wiig Company reported the following data for the

The South Division of Wiig Company reported the following data for the current year. Sales ………………………………….. $3,000,000 Variable costs …………………….…. 1,950,000 Controllable fixed costs ………….… 600,000 Aver...

Q: The Ferrell Transportation Company uses a responsibility reporting system to measure the

The Ferrell Transportation Company uses a responsibility reporting system to measure the performance of its three investment centers: Planes, Taxis, and Limos. Segment performance is measured using a...

Q: Sentinel Industries has manufactured prefabricated houses for over 20 years. The

Sentinel Industries has manufactured prefabricated houses for over 20 years. The houses are constructed in sections to be assembled on customers’ lots. Sentinel expanded into the pre...

Q: Henderson Office Supply is considering a more liberal credit policy to increase

Henderson Office Supply is considering a more liberal credit policy to increase sales, but expects that 9 percent of the new accounts will be uncollectible. Collection costs are 6 percent of new sales...

Q: Global Services is considering a promotional campaign that will increase annual credit

Global Services is considering a promotional campaign that will increase annual credit sales by $450,000. The company will require investments in accounts receivable, inventory, and plant and equipmen...

Q: Go to Table 10-1, which is based on bonds

Go to Table 10-1, which is based on bonds paying 10 percent interest for 20 years. Assume interest rates in the market (yield to maturity) decline from 11 percent to 8 percent: a. What is the bond pr...

Q: The Vinson Corporation has earnings of $500,000 with 250

The Vinson Corporation has earnings of $500,000 with 250,000 shares outstanding. Its P/E ratio is 20. The firm is holding $300,000 of funds to invest or pay out in dividends. If the funds are retaine...

Q: The Sooner Equipment Company has total assets of $100 million.

The Sooner Equipment Company has total assets of $100 million. Of this total, $40 million was financed with common equity and $60 million with debt (both long term and short term). Its average account...

Q: Given the following data for Profiteers, Inc., and the corresponding

Given the following data for Profiteers, Inc., and the corresponding industry averages, perform a trend analysis of the return on investment and the return on stockholders’ equity. P...

Q: 1. Which of the following businesses is the least likely to

1. Which of the following businesses is the least likely to be operated as a partnership? a. accounting firm b. doctors ’ office c. lawyers ’ office d. steel foundry 2. Which of the following statemen...

Q: 17. A health food retailer has $120,000 in

17. A health food retailer has $120,000 in monthly operating expenses and planned monthly sales of $400,000. Reductions are planned to be $10,000. A profit goal of $40,000 is established. What is the...

Q: Suppose that the investment demand curve in a certain economy is such

Suppose that the investment demand curve in a certain economy is such that investment declines by $100 billion for every 1 percentage point increase in the real interest rate. Also, suppose that the i...

Q: How does a firm’s required rate of return on investment enter into

How does a firm’s required rate of return on investment enter into the analysis of changes in its credit and collection policies?

Q: How does the firm’s required rate of return on investment enter into

How does the firm’s required rate of return on investment enter into inventory decisions?

Q: Roxy’s Recording Studio rents studio time to musicians in two-hour

Roxy’s Recording Studio rents studio time to musicians in two-hour blocks. Each session includes the use of the studio facilities, a digital recording of the performance, and a professional music prod...

Q: Travis Corporation produces high-performance rotors. It expects to produce

Travis Corporation produces high-performance rotors. It expects to produce 50,000 rotors in the coming year. It has invested $10 million to produce the rotors. The company has a required return on inv...

Q: Bolus Computer Parts Ltd. is setting a selling price on a

Bolus Computer Parts Ltd. is setting a selling price on a new component it has just designed and developed. The following cost estimates for this new component have been provided by the accounting dep...

Q: Bosworth Electronics Inc. is setting a selling price on a new

Bosworth Electronics Inc. is setting a selling price on a new CDL component it has just developed. The accounting department has provided the following cost estimates for this component for a budgeted...

Q: Construction on the Atlantis Full-Service Car Wash is nearing completion

Construction on the Atlantis Full-Service Car Wash is nearing completion. The owner is Jay Giolti, a retired accounting professor. The car wash is strategically located on a busy street that separates...

Q: John Blodgett is the managing partner of a business that has just

John Blodgett is the managing partner of a business that has just finished building a 60-room motel. Blodgett anticipates that he will rent these rooms for 15,000 nights next year (or 15,000 room-nigh...

Q: Road Warrior manufactures and sells a model of motorcycle, XR500.

Road Warrior manufactures and sells a model of motorcycle, XR500. In 2011, it reported the following: Required: 1. What was Road Warrior’s operating income on XR500 in 2011? What w...

Q: Fan Base (FB) operates a megastore featuring sports merchandise.

Fan Base (FB) operates a megastore featuring sports merchandise. It uses an EOQ decision model to make inventory decisions. It is now considering inventory decisions for its Los Angeles Galaxy soccer...

Q: Jackson Markets, a chain of traditional supermarkets, is interested in

Jackson Markets, a chain of traditional supermarkets, is interested in gaining access to the organic and health food retail market by acquiring a regional company in that sector. Jackson intends to op...

Q: Superior Motor Company makes electric cars and has only two products,

Superior Motor Company makes electric cars and has only two products, the Simple green and the Superior green. To produce the Simple green, Superior Motor employed assets of $13,500,000 at the beginni...

Q: Performance Auto Company operates a new car division (that sells high

Performance Auto Company operates a new car division (that sells high performance sports cars) and a performance parts division (that sells performance improvement parts for family cars). Some divisio...

Q: The Seaside Corporation manufactures similar products in the United States and Norway

The Seaside Corporation manufactures similar products in the United States and Norway. The U.S. and Norwegian operations are organized as decentralized divisions. The following information is availabl...

Q: Eva Manufacturing makes fashion products and competes on the basis of quality

Eva Manufacturing makes fashion products and competes on the basis of quality and leading-edge designs. The company has $3,000,000 invested in assets in its clothing manufacturing division. After-tax...

Q: The Margro Corporation is an automotive supplier that uses automatic turning machines

The Margro Corporation is an automotive supplier that uses automatic turning machines to manufacture precision parts from steel bars. Margro’s inventory of raw steel averages $600,00...

Q: Global Event Group has two major divisions: print and Internet.

Global Event Group has two major divisions: print and Internet. Summary financial data (in millions) for 2011 and 2012 are as follows: The two division managers’ annual bonuses are...

Q: Return on investment is often expressed as follows: Compare and

Return on investment is often expressed as follows: Compare and contrast performances under ROI and residual income. Instructions a. Explain the advantages of breaking down the ROI calculation into t...

Q: Kappa Company has three divisions: A, B, and C

Kappa Company has three divisions: A, B, and C. Each year the vice-president incharge of the best-performing division is entitled to a sizeable bonus. The results for the year are now in and each vice...

Q: Return on investment is often expressed as follows: Compare and

Return on investment is often expressed as follows: Compare and contrast performances under ROI and residual income. Instructions a. Explain the advantages of breaking down the ROI calculation into t...

Q: Steelwall Inc. uses the return on investment as a performance measure

Steelwall Inc. uses the return on investment as a performance measure and defines investment as the average operating assets. The company bases management bonuses in part on the ROI and expects all in...

Q: Haniwall Industries has manufactured prefabricated houses for over 20 years.

Haniwall Industries has manufactured prefabricated houses for over 20 years. Calculate ROI and residual income and discuss impact on manager performance. The houses are constructed in sections that ar...

Q: National Motors is a major car manufacturer with a wide variety of

National Motors is a major car manufacturer with a wide variety of models, including its most recent one, the Mountaineer. The new model uses parts and components from external suppliers, as well as s...

Q: The green division of Campana Company reported the following data for the

The green division of Campana Company reported the following data for the current year: Calculate ROI for current year and for possible future changes. Sales …………………………………………………. $3,000,000 Variable...

Q: The Transcanadian Transportation Company uses a responsibility reporting system to measure the

The Transcanadian Transportation Company uses a responsibility reporting system to measure the performance of its three investment centres: planes, taxis, and limos. It measures segment performance us...

Q: Data for the investment centres for Stahl Company are given in BE11

Data for the investment centres for Stahl Company are given in BE11.9. The centres expect the following changes in the next year: Centre I a 15% increase in sales; Centre II a $200,000 decrease in cos...

Q: For its three investment centres, Stahl Company accumulates the following data

For its three investment centres, Stahl Company accumulates the following data: Calculate the return on investment (ROI) for each centre. Calculate return on investment using ROI formula.

Q: The service division of Retro Industries reported the following results for 2020

The service division of Retro Industries reported the following results for 2020. Calculate ROI and expected return on investments. Sales ……………………………….. $500,000 Variable costs ……………………. 300,000 Cont...

Q: The Norse Division of Gridiron Concepts Inc. experienced significant revenue and

The Norse Division of Gridiron Concepts Inc. experienced significant revenue and profit growth from 20Y4 to 20Y6 as shown in the following divisional income statements: There are no service departme...

Q: Data for the North, South, East, and West divisions

Data for the North, South, East, and West divisions of Free Bird Company are as follows: A. Determine the missing items, identifying each by the letters (A) through (L). (Round percentages and inves...

Q: GNC Holdings Inc. is a leading retailer of health and nutrition

GNC Holdings Inc. is a leading retailer of health and nutrition products, which are sold through both company-operated (3,500 outlets) and franchised retail (3,200 outlets) stores. In addition, GNC ma...

Q: Domino’s Pizza, Inc. is the second-largest pizza chain

Domino’s Pizza, Inc. is the second-largest pizza chain in the world. In the United States, Domino’s has 377 company-owned restaurants and 4,690 franchised restauran...

Q: H &R Block Inc. provides tax preparation services throughout the

H &R Block Inc. provides tax preparation services throughout the United States and other parts of the world. These services are provided through company-owned and franchised operations. The total...

Q: The Crunchy Granola Company is a diversified food company that specializes in

The Crunchy Granola Company is a diversified food company that specializes in all natural foods. The company has three operating divisions organized as investment centers. Condensed data taken from th...

Q: The vice president of operations of Recycling Industries is evaluating the performance

The vice president of operations of Recycling Industries is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed income statement data for the pas...

Q: The management of Southern Express Corporation is considering investing 10% of

The management of Southern Express Corporation is considering investing 10% of all future earnings in growth. The company has a single growth opportunity that it can take either now or in one period....

Q: Lauder Adventures Limited (LAL) was incorporated over 40 years ago

Lauder Adventures Limited (LAL) was incorporated over 40 years ago as an amusement park and golf course. Over time, a nearby city has grown to the point where it borders on LAL's properties. In recent...

Q: You, CPA, have been working for Plener and Partners,

You, CPA, have been working for Plener and Partners, Chartered Professional Accountants (P&P), a mid-size CPA firm, for three years. You have been assigned a new project for a long-term client of...

Q: Vulcan Manufacturing Limited (VML) is a Canadian-based multinational

Vulcan Manufacturing Limited (VML) is a Canadian-based multinational plastics firm, with subsidiaries in several foreign countries and worldwide consolidated total assets of $500 million. VML's shares...

Q: Pender Corp. paid $285,000 for a 30%

Pender Corp. paid $285,000 for a 30% interest in Saltspring Limited on January 1, Year 6. During Year 6, Saltspring paid dividends of $110,000 and reported profit as follows: Pender's profit for Yea...

Q: During the last decade, many institutions dedicated to improving the quality

During the last decade, many institutions dedicated to improving the quality of products and services in the United States have been formed. Many of these groups annually give awards to companies that...

Q: There are thousands of mutual funds available (see page 161 for

There are thousands of mutual funds available (see page 161 for a brief introduction to mutual funds). There is no shortage of sources of information about them. Newspapers regularly report the value...

Q: Eckard plc is a large, all-equity financed, divisional

Eckard plc is a large, all-equity financed, divisional zed textile company whose shares are listed on the London Stock Exchange. It has a current cost of capital of 15 per cent. The annual performance...

Q: J plc’s business is organized into divisions. For operating purposes,

J plc’s business is organized into divisions. For operating purposes, each division is regarded as an investment centre, with divisional managers enjoying substantial autonomy in the...

Q: Indico Ltd is a well-established company that has operated in

Indico Ltd is a well-established company that has operated in a sound but static market for many years where it has been the dominant supplier. Over the past three years it has diversified into three...

Q: Leano plc is investigating the financial viability of a new product X

Leano plc is investigating the financial viability of a new product X. Product X is a short life product for which a market has been identified at an agreed design specification. It is not yet clear w...

Q: According to Industrial Info Resources, a leading provider of industrial intelligence

According to Industrial Info Resources, a leading provider of industrial intelligence data, the sustained high prices for oil and natural gas that existed at the time prompted an increasing interest i...

Q: Haskin Company was founded 40 years ago and now has several manufacturing

Haskin Company was founded 40 years ago and now has several manufacturing plants in the Northeast and Midwest. The evaluation of proposed capital expenditures became increasingly difficult for managem...

Q: Starwood Hotels & Resorts Worldwide provides lodging services around the world.

Starwood Hotels & Resorts Worldwide provides lodging services around the world. The company is separated into two major divisions. • Hotel Ownership: Hotels owned and operated by...

Q: The Norsk Division of Gridiron Concepts Inc. has been experiencing revenue

The Norsk Division of Gridiron Concepts Inc. has been experiencing revenue and profit growth during the years 2014–2016. The divisional income statements follow: Assume that there...

Q: The income from operations and the amount of invested assets in each

The income from operations and the amount of invested assets in each division of Magnetic Zero Industries are as follows: a. Compute the rate of return on investment for each division. b. Which divi...

Q: Briggs Company has income from operations of $36,000,

Briggs Company has income from operations of $36,000, invested assets of $180,000, and sales of $720,000. Use the DuPont formula to compute the rate of return on investment and show (a) the profit ma...

Q: In a recent study of enterprise resource planning (ERP) system

In a recent study of enterprise resource planning (ERP) system effectiveness, researchers asked companies about how they assessed the success of their ERP systems. Out of 335 manufacturing companies s...

Q: 14. Magnolia Company's Division A has operating income of $122

14. Magnolia Company's Division A has operating income of $122,600 and assets of $303,800. The minimum acceptable return on investment is 11%. What is the residual income for the division? 15. Motorc...

Q: The Maritime Engineering Corp sold 1,500 convertible bonds two years

The Maritime Engineering Corp sold 1,500 convertible bonds two years ago at their $1,000 par value. The 20-year bonds carried a coupon rate of 8% and were convertible into stock at $20 per share. At...

Q: Joe Trenton expects to retire in 15 years and has suddenly realized

Joe Trenton expects to retire in 15 years and has suddenly realized that he hasn’t saved anything toward that goal. After giving the matter some thought, he has decided that he would like to retire w...

Q: Toddler Toy Company sells baby dolls, teddy bears, and toy

Toddler Toy Company sells baby dolls, teddy bears, and toy cars. The managers established a preliminary budget using the following assumptions. They would now like to evaluate the sensitivity of budge...

Q: The Nutrition Division of Regal Foods focuses on health-related products

The Nutrition Division of Regal Foods focuses on health-related products. Historically, the Nutrition Division has been an excellent contributor to group performance, with annual growth rates of up to...

Q: 1. For the Burger Palace example, perform a complete analysis

1. For the Burger Palace example, perform a complete analysis of efficiency improvement alternatives for unit S2, including determination of a composite reference unit. 2. For the Burger Palace exampl...

Q: Sunshop Books is a multi-divisional book company that listed on

Sunshop Books is a multi-divisional book company that listed on the stock exchange about three years ago. Like many in the industry, Sunshop started out in the 1980s as a single-site suburban bookstor...

Q: Synergy Ltd’s incentive plan is based on a shared bonus pool.

Synergy Ltd’s incentive plan is based on a shared bonus pool. Return on investment (ROI) is used as the main performance metric and is calculated as: Operating profit before tax ÷ Assets at gross boo...

Q: Explain how return on investment (ROI) is calculated and how

Explain how return on investment (ROI) is calculated and how it can be decomposed into two financial measures.

Q: Mirror Industries laminating division, BrightShine, incurred the following costs and

Mirror Industries laminating division, BrightShine, incurred the following costs and expenses in the last period. During the period, BrightShine produced 300 000 units of industrial phot...

Q: Senior management at Harriot Industries, an Italian-based fashion house

Senior management at Harriot Industries, an Italian-based fashion house and cosmetics company, have been engaged in a debate around the best key financial measure relevant to evaluate the performance...

Q: The following financial data are for the evaluation of performance for Sandy

The following financial data are for the evaluation of performance for Sandy Point Construction: Sandy Point Construction currently uses return on investment to evaluate investment centre managers....

Q: Refer to the information in Problem 18.21. The manager

Refer to the information in Problem 18.21. The manager of Sandy Point Construction is considering a new project. She can buy or lease equipment that will reprocess tailings from old mines to remove an...

Q: Fowler Electronics produces colour plasma screens in its Bien Hoa plant in

Fowler Electronics produces colour plasma screens in its Bien Hoa plant in Vietnam. The screens are then shipped to the entity’s plant in Sturt, South Australia, where they are incorporated into finis...

Q: A segment of Canine Holdings reports sales of $280 000 and

A segment of Canine Holdings reports sales of $280 000 and a profit of $60 000. The data below also relate to this segment of Canine Holdings. Total assets ………………….………………………… $650 000 Accumulated depr...

Q: Tan Corporation of Japan has two regional divisions with headquarters in Osaka

Tan Corporation of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Required: 1. For each division, compute the margin, turnover, a...

Q: Financial data for Joel de Paris, Inc., for last year

Financial data for Joel de Paris, Inc., for last year follow: The company paid dividends of $15,000 last year. The “Investment in Buisson, S.A.,” on the balance s...

Q: “I know headquarters wants us to add that new product line

“I know headquarters wants us to add that new product line,” said Dell Havasi, manager of Billings Company’s Office Products Division. â...

Q: Simmons Company is a merchandiser with multiple store locations. One of

Simmons Company is a merchandiser with multiple store locations. One of its store managers is considering a shift in her store’s product mix in anticipation of a strengthening economy. Her store would...

Q: What is return on investment (ROI), and how is it

What is return on investment (ROI), and how is it calculated?

Q: What are the measurement issues to consider when using return on investment

What are the measurement issues to consider when using return on investment (ROI)?

Q: What are the advantages and limitations of return on investment (ROI

What are the advantages and limitations of return on investment (ROI) as a performance measure?

Q: What are the components of return on investment (ROI), and

What are the components of return on investment (ROI), and how is each component interpreted and used?

Q: How does the concept of economic value added, EVA®, compare

How does the concept of economic value added, EVA®, compare, as a measure of financial performance, to return on investment (ROI) and residual income (RI)?

Q: Smith Branded Apparel designs T-shirts for businesses and corporations.

Smith Branded Apparel designs T-shirts for businesses and corporations. The accounting manager has presented the latest quarter’s return on sales of 10% and asset turnover of 1.5. What is the company’...

Q: Scott Healthcare provides a walk-in clinic for its patients and

Scott Healthcare provides a walk-in clinic for its patients and a pharmacy for any medication prescribed by the doctor. Last year, Scott generated total sales of $500,000 and $100,000 in profits. Scot...

Q: Matthews Produce harvests and sells Florida oranges. Matthews has hired you

Matthews Produce harvests and sells Florida oranges. Matthews has hired you to determine its return on investment (ROI) based on both net book value (NBV) and gross book value (GBV). Financial data fo...

Q: Moore Money is a financial services firm specializing in fixed-income

Moore Money is a financial services firm specializing in fixed-income investments. You have been asked by the accounting manager to analyze the company’s financial data from the last quarter. You find...

Q: King Mattresses sells both mattress sets and bed frames. Last quarter

King Mattresses sells both mattress sets and bed frames. Last quarter, total sales were $50,000 for mattress sets and $25,000 for bed frames. Return on investment (ROI) was 10% for both divisions, whi...

Q: Using the data from Brief Exercise 19-16, compute King

Using the data from Brief Exercise 19-16, compute King Mattresses’s total return on sales (ROS) for the quarter. Brief Exercise 19-16: King Mattresses sells both mattress sets and bed frames. Last qu...

Q: Williams Inc. produces a single product, a part used in

Williams Inc. produces a single product, a part used in the manufacture of automobile transmissions. Known for its quality and performance, the part is sold to luxury auto manufacturers around the wor...

Q: Alex Chunn Inc. has the following financial data for 2022 for

Alex Chunn Inc. has the following financial data for 2022 for its three regional divisions: Required: Prepare an Excel spreadsheet that will calculate return on sales (ROS) for each division for 202...

Q: Liz Raiborn Inc. has the following financial results for the years

Liz Raiborn Inc. has the following financial results for the years 2022 through 2024 for its three regional divisions: Required: Calculate return on sales (ROS), asset turnover (AT), and return on i...

Q: Schwenn Products, a bicycle manufacturer, uses normal volume as the

Schwenn Products, a bicycle manufacturer, uses normal volume as the basis for setting prices. That is, it sets prices on the basis of long-term volume predictions and then adjusts these prices only fo...

Q: As indicated in the chapter, return on investment (ROI)

As indicated in the chapter, return on investment (ROI) is well entrenched in business practice. However, its use can have negative incentive effects on managerial behavior. For example, assume you ar...

Q: Heather Smith Cosmetics (HSC) manufactures a variety of products and

Heather Smith Cosmetics (HSC) manufactures a variety of products and is organized into three divisions (investment centers): soap products, skin lotions, and hair products. Information about the most...

Q: The Boston Consulting Group identified the world’s 50 most innovative companies.

The Boston Consulting Group identified the world’s 50 most innovative companies. The rankings are based on a survey of senior executives, as well as financial metrics such as total shareholder return...

Q: Ready Products Inc. operates two divisions, each with its own

Ready Products Inc. operates two divisions, each with its own manufacturing facility. The accounting system reports the following data for 2022: Ready estimates the useful life of each manufacturing...

Q: As indicated in the chapter, there are goal congruence problems associated

As indicated in the chapter, there are goal congruence problems associated with the use of return on investment (ROI) as an indicator of business unit financial performance. One such problem relates t...

Q: The authors of an article published in Harvard Business Review (Laurie

The authors of an article published in Harvard Business Review (Laurie Bassei and Daniel McMurrer, “Maximizing Your Return on People,” Harvard Business Review (March 2007), p. 115-123) discuss how the...

Q: What is the return on investment (ROI) of corporate wellness

What is the return on investment (ROI) of corporate wellness programs? What are the nonfinancial returns on such investments? The following article addresses the concept of return on investment for th...

Q: Consolidated Industries is a diversified manufacturer with business units organized as divisions

Consolidated Industries is a diversified manufacturer with business units organized as divisions, including the Reigis Steel Division. Consolidated monitors its divisions on the basis of both unit con...

Q: Blackwood Industries manufactures die machinery. To meet its expansion needs,

Blackwood Industries manufactures die machinery. To meet its expansion needs, it recently (2020) acquired one of its suppliers, Delta Steel. To maintain Delta’s separate identity, Bl...

Q: McCoy Brands Inc. (MBI) is a retailer of consumer

McCoy Brands Inc. (MBI) is a retailer of consumer products. The company made two acquisitions in previous years to diversify its product lines. In 2020, MBI acquired a consumer electronics firm produc...

Q: An investment bank has been monitoring its return on investment for a

An investment bank has been monitoring its return on investment for a certain category of its shareholders. Past data show a mean yield of 7.5% with a standard deviation of 1.5%. Assuming normality of...

Q: Refer to Exercise 9-42. With the adoption of a

Refer to Exercise 9-42. With the adoption of a slightly more conservative investment strategy, the bank forecasts a mean yield of 7.0% with a standard deviation of 0.9%. Assuming normality of distribu...

Q: Refer to Exercise 9-43 on the investment bank. Using

Refer to Exercise 9-43 on the investment bank. Using the investment strategy that yields a mean yield of 7.0% with a standard deviation of 0.9%, what should a published goal of yield for customers be...

Q: Refer to Exercise 9-42. The investment bank was able

Refer to Exercise 9-42. The investment bank was able to identify a riskier strategy that projects a mean yield of 9.2% with a standard deviation of 2.4%. Assuming normality of distribution of yield ra...

Q: The following data pertain to Dakota Division’s most recent year of operations

The following data pertain to Dakota Division’s most recent year of operations. Income …………………………………………………….. $ 4,000,000  Sales revenue …………………………………………….. 50,000,000  Average invested capital...

Q: Select one of the following companies (or any company of your

Select one of the following companies (or any company of your choosing) and use the Internet to explore the company’s most recent annual report. Required: 1. Calculate the company&a...

Q: Kenneth Washburn, head of the Sporting Goods Division of Reliable Products

Kenneth Washburn, head of the Sporting Goods Division of Reliable Products, has just completed a miserable nine months. “If it could have gone wrong, it did. Sales are down, income i...

Q: Holiday Entertainment Corporation (HEC), a subsidiary of New Age Industries

Holiday Entertainment Corporation (HEC), a subsidiary of New Age Industries, manufactures go-carts and other recreational vehicles. Family recreational centers that feature not only go-cart tracks but...

Q: Wyalusing Industries has manufactured prefabricated houses for over 20 years. The

Wyalusing Industries has manufactured prefabricated houses for over 20 years. The houses are constructed in sections to be assembled on customers’ lots. Wyalusing expanded into the p...

Q: Rochester Manufacturing Corporation (RMC) is considering moving some of its

Rochester Manufacturing Corporation (RMC) is considering moving some of its production from traditional numerically controlled machines to a flexible manufacturing system (FMS). Its computer numerical...

Q: Match each of the terms by inserting the appropriate definition letter in

Match each of the terms by inserting the appropriate definition letter in the space provided. Not all definitions will be used. 1. Balanced Scorecard 2. Centralized Organization 3. DuPont Method 4. Hu...

Q: Solano Company has sales of $500,000, cost of

Solano Company has sales of $500,000, cost of goods sold of $370,000, other operating expenses of $50,000, average invested assets of $1,600,000, and a hurdle rate of 6 percent. Required: 1. Determine...

Q: Kaler Company has sales of $1,210,000,

Kaler Company has sales of $1,210,000, cost of goods sold of $735,000, other operating expenses of $148,000, average invested assets of $3,400,000, and a hurdle rate of 12 percent. Required: 1. Determ...

Q: Orange Corp. has two divisions: Fruit and Flower. The

Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is available for each division: Orange has established a hurdle rate of 12 percent. Required: 1. Compute e...

Q: Luke Company has three divisions: Peak, View, and Grand

Luke Company has three divisions: Peak, View, and Grand. The company has a hurdle rate of 6 percent. Selected operating data for the three divisions follow: Required: 1. Compute the return on investme...

Q: The Western Division of Claremont Company had net operating income of $

The Western Division of Claremont Company had net operating income of $135,000 and average invested assets of $560,000. Claremont has a required rate of return of 15 percent. Western has an opportunit...

Q: Violet Company has sales of $520,000, net operating

Violet Company has sales of $520,000, net operating income of $310,000, average invested assets of $940,000, and a hurdle rate of 10 percent. Calculate Violet’s return on investment and its residual i...

Q: Myrtle Company has sales of $140,000, cost of

Myrtle Company has sales of $140,000, cost of goods sold of $70,000, operating expenses of $20,000, average invested assets of $400,000, and a hurdle rate of 6 percent. Calculate Myrtle’s return on in...

Q: Augusta Corp’s Golf Division has sales of $200,000,

Augusta Corp’s Golf Division has sales of $200,000, cost of goods sold of $105,000, operating expenses of $35,000, average invested assets of $900,000, and a hurdle rate of 12 percent. Calculate the G...

Q: A number of terms and concepts from this chapter and a list

A number of terms and concepts from this chapter and a list of descriptions, definitions, and explanations appear as follows. For each term listed (1 through 9), choose at least one corresponding item...

Q: Coolbrook Company has the following information available for the past year:

Coolbrook Company has the following information available for the past year: The company’s hurdle rate is 6 percent. Required: 1. Calculate return on investment (ROI) and residual in...

Q: The following is partial information for Charleston Company’s most recent year of

The following is partial information for Charleston Company’s most recent year of operation. It manufactures lawn mowers and categorizes its operations into two divisions: Bermuda an...

Q: Escuda Company has the following information available for the past year:

Escuda Company has the following information available for the past year: The company’s hurdle rate is 12 percent. 1. Determine Escuda’s return on investment (ROI)...

Q: The following is partial information for Tonopah Company’s most recent year of

The following is partial information for Tonopah Company’s most recent year of operation. Tonopah manufactures children’s shoes and categorizes its operations into...

Q: Explain how relying on return on investment for performance evaluation of investment

Explain how relying on return on investment for performance evaluation of investment center managers could lead to goal incongruence.

Q: What benefit does residual income offer in comparison to return on investment

What benefit does residual income offer in comparison to return on investment when evaluating performance?

Q: What role do return on investment and residual income play in responsibility

What role do return on investment and residual income play in responsibility accounting?

Q: The operating income and the amount of invested assets in each division

The operating income and the amount of invested assets in each division of Conley Industries are as follows: a. Compute the return on investment for each division. b. Which division is the most profi...

Q: The condensed income statement for the Consumer Products Division of Tri-

The condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as follows (assuming no support department allocations): The manager of the Consumer Products Divisio...

Q: The Walt Disney Company (DIS) has four business segments,

The Walt Disney Company (DIS) has four business segments, described as follows: • Media Networks: Television and radio • Parks and Resorts: Resorts, including Disne...

Q: A condensed income statement for the Commercial Division of Maxell Manufacturing Inc

A condensed income statement for the Commercial Division of Maxell Manufacturing Inc. for the year ended December 31, 20Y9, is as follows: Assume that the Commercial Division received no allocations...

Q: A condensed income statement for the Electronics Division of Gihbli Industries Inc

A condensed income statement for the Electronics Division of Gihbli Industries Inc. for the year ended December 31, 20Y9, is as follows: Assume that the Electronics Division received no allocations f...

Q: (a) Explain how return on investment might lead a divisional

(a) Explain how return on investment might lead a divisional manager to reject new investments that could be profitable for the company as a whole. (b) How can this disadvantage be overcome?

Q: Kelly Kitchens operates both franchised and company-operated restaurants under the

Kelly Kitchens operates both franchised and company-operated restaurants under the brand name Kelly Kitchens. Operating income, sales, and invested assets for both segments are provided as follows: a...

Q: United States and Canada and serves over 9 million customers per week

United States and Canada and serves over 9 million customers per week. Panera’s operations are divided into the following segments: ▪ Company-Operated Bakery-Cafes...

Q: Papa John’s International, Inc. (PZZA), operates over 5

Papa John’s International, Inc. (PZZA), operates over 5,000 restaurants in the United States and 45 countries. The company operates primarily as a franchisor with 4,353 franchised re...

Q: McDonald’s Corporation (MCD) operates company-owned and franchised restaurants

McDonald’s Corporation (MCD) operates company-owned and franchised restaurants in over 100 countries. The company operates primarily as a franchisor with approximately 85% of its cur...

Q: Allstar Company invests in a project with expected cash inflows of $

Allstar Company invests in a project with expected cash inflows of $9,000 per year for four years. All cash flows occur at year-end. The required return on investment is 9%. If the project generates a...

Q: In 2015/16, sustained high prices for oil and natural

In 2015/16, sustained high prices for oil and natural gas prompted an increasing interest in drilling in locations that were previously not considered. For example, oil is being extracted from sands...

Q: Each year, Institutional Shareholder Services (ISS) conducts a Global

Each year, Institutional Shareholder Services (ISS) conducts a Global Benchmark Policy Survey as part of an annual development process. Questions in 2019 included a broad range of topics such as bo...

Q: Récré-Gaules SARL produces and distributes a wide variety of recreational

Récré-Gaules SARL produces and distributes a wide variety of recreational products. One of its divisions, the Idefix Division, manufactures and sells ‘menhi...

Q: Faulkenheim GmbH is a manufacturer of tool and die machinery. Faulkenheim

Faulkenheim GmbH is a manufacturer of tool and die machinery. Faulkenheim is a vertically integrated company that is organized into two divisions. The Frankfurt Steel Division manufactures alloy steel...

Q: Salvador SA assembles motorcycles and uses long-run (defined as

Salvador SA assembles motorcycles and uses long-run (defined as 3–5 years) average demand to set the budgeted production level and costs for pricing. Prices are then adjusted only fo...

Q: The Portimão Division of AmicaLda sells car batteries. Amica’s corporate management

The Portimão Division of AmicaLda sells car batteries. Amica’s corporate management gives Portimão management considerable operating and investment autonomy in running the division. Amica is consider...

Q: Forey Inc. competes against many other firms in a highly competitive

Forey Inc. competes against many other firms in a highly competitive industry. Over the last decade, several firms have entered this industry and, as a consequence, Forey is earning a return on invest...

Q: A company reports the following for the past year. /

A company reports the following for the past year. The company’s CFO believes that income for next year will be $1,200,000. Average assets will be the same as the past year. 1. Compu...

Q: A growing chain is trying to decide which store location to open

A growing chain is trying to decide which store location to open. The first location (A) requires a $1,000,000 investment in average assets and is expected to yield annual income of $160,000. The seco...

Q: Working part-time in a restaurant near his university, Sabastian

Working part-time in a restaurant near his university, Sabastian expects to earn €2,000 during his three-month summer vacation. He plans to invest his hard-earned money in the availab...

Q: Hector Gaming Company (HGC) is an educational gaming company specializing

Hector Gaming Company (HGC) is an educational gaming company specializing in young children’s educational games. HGC has just completed their fourth year of operation. This year was a banner year for...

Q: The purpose of this case is to give you experience in using

The purpose of this case is to give you experience in using a project priority system that ranks proposed projects by their contribution to the organization’s objectives and strategi...

Q: How would you expect the components of return on investment to be

How would you expect the components of return on investment to be different for a mostly Internet-based retailer compared to a more traditional bricks-and-mortar retailer (e.g., Amazon.com versus Barn...

Q: The manager of the Fleet division of Potlatch Automotive is evaluated on

The manager of the Fleet division of Potlatch Automotive is evaluated on her division’s return on investment and residual income. The company requires that all divisions generate a minimum return on i...

Q: Marshall Technology is considering two alternative proposals for modernizing its production facilities

Marshall Technology is considering two alternative proposals for modernizing its production facilities. To provide a basis for selection, the cost accounting department has developed the following dat...

Q: Willie Industries is evaluating two alternative investment opportunities. The controller of

Willie Industries is evaluating two alternative investment opportunities. The controller of the company has prepared the following analysis of the two investment proposals. Items in addition to deprec...

Q: Marengo is a popular restaurant located in Chilton Resort. Management feels

Marengo is a popular restaurant located in Chilton Resort. Management feels that enlarging the facility to incorporate a large outdoor seating area will enable Marengo to continue to attract existing...

Q: V. S. Yogurt is considering two possible expansion plans.

V. S. Yogurt is considering two possible expansion plans. Proposal A involves opening 10 stores in northern California at a total cost of $3,150,000. Under another strategy, Proposal B, V. S. Yogurt w...

Q: Sonic, Inc., sells business software. Currently, all of

Sonic, Inc., sells business software. Currently, all of its programs come on disks. Due to their complexity, some of these applications occupy as many as seven disks. Not only are the disks cumbersome...

Q: Jennifer Baskiter is president and CEO of Plants&More.com

Jennifer Baskiter is president and CEO of Plants&More.com, an Internet company that sells plants and flowers. The success of her startup Internet company has motivated her to expand and create two div...

Q: Jackson Mountain is a small ski resort located in northern Connecticut.

Jackson Mountain is a small ski resort located in northern Connecticut. In recent years, the resort has experienced two major problems: (1) unusually low annual snowfalls and (2) long lift lines. To r...

Q: Boom, Inc., sells business software. Currently, all of

Boom, Inc., sells business software. Currently, all of its programs come on disks. Due to their complexity, some of these applications occupy as many as seven disks. Not only are the disks cumbersome...

Q: Nelson Equipment Company is evaluating two alternative investment opportunities. The controller

Nelson Equipment Company is evaluating two alternative investment opportunities. The controller of the company has prepared the following analysis of the two investment proposals. Items in addition to...

Q: Samba is a popular restaurant located in Brazilton Resort. Management feels

Samba is a popular restaurant located in Brazilton Resort. Management feels that enlarging the facility to incorporate a large outdoor seating area will enable Samba to continue to attract existing cu...

Q: I.C. Cream is considering two possible expansion plans.

I.C. Cream is considering two possible expansion plans. Proposal A involves opening eight stores in northern Alaska at a total cost of $4,000,000. Under another strategy, Proposal B, I.C. Cream would...

Q: Tucker Technology is considering two alternative proposals for modernizing its production facilities

Tucker Technology is considering two alternative proposals for modernizing its production facilities. To provide a basis for selection, the cost accounting department has developed the following data...

Q: Bronson Corporation recently filed the following information with the SEC regarding its

Bronson Corporation recently filed the following information with the SEC regarding its executive compensation. Base Salary: The Board of Directors annually reviews each executive officer’s salary. Th...

Q: The manager of Princeton Therapeutic’s Hospital division is evaluated on her division’s

The manager of Princeton Therapeutic’s Hospital division is evaluated on her division’s return on investment and residual income. The company requires that all divisions generate a minimum return on i...

Q: AB Ltd operates retail stores throughout the country. The business is

AB Ltd operates retail stores throughout the country. The business is divisionalised. Included in its business are Divisions A and B. A centralised and automated warehouse that replenishes inventories...

Q: Knowledge Management at ConocoPhillips35 ConocoPhillips is an integrated energy company engaged in

ConocoPhillips is an integrated energy company engaged in four core businesses: 1. petroleum exploration and production; 2. midstream natural gas processes and marketing; 3. petroleum refining, m...

Q: Jack Bracket, the CEO of Bracket International (BI), has

Jack Bracket, the CEO of Bracket International (BI), has grown his business to sales last year of $78 million, with a cost of goods sold of $61 million. Average inventory levels are about $14 million....

Q: The following strategic objectives have been derived from a strategy that seeks

The following strategic objectives have been derived from a strategy that seeks to improve asset utilization by more careful development and use of its human assets and internal processes: a. Increase...

Q: Wonder Amusements Ltd. (WAL) was incorporated over 40 years

Wonder Amusements Ltd. (WAL) was incorporated over 40 years ago as an amusement park and golf course. Over time, a nearby city has grown to the point where it borders on WAL’s proper...

Q: Assume Magnificent Modems Inc. (MMI) is a division of

Assume Magnificent Modems Inc. (MMI) is a division of Gilmore Business Products (GBP). GBP uses ROI as the primary measure of managerial performance. GBP has a desired return on investment (ROI) of 3...

Q: What is the formula for calculating return on investment (ROI)?

What is the formula for calculating return on investment (ROI)?

Q: What is the difference between return on investment and return on equity

What is the difference between return on investment and return on equity?

Q: Lumberton Home Maintenance Company (LHMC) earned operating income of $

Lumberton Home Maintenance Company (LHMC) earned operating income of $6,000,000 on operating assets of $62,500,000 during Year 2. The Tree Cutting Division earned $1,000,000 on operating assets of $10...

Q: Eastevan Company calculated its return on investment as 10 percent. Sales

Eastevan Company calculated its return on investment as 10 percent. Sales are now $300,000, and the amount of total operating assets is $320,000. Required 1. If expenses are reduced by $28,000 and sal...

Q: Welch Insurance Company (WIC) earned operating income of $24

Welch Insurance Company (WIC) earned operating income of $24,000,000 on operating assets of $200,000,000 during Year 2. The Automobile Insurance Division earned $4,770,000 on operating assets of $36,0...

Q: Bellco, a division of Becker International Corporation, is operated under

Bellco, a division of Becker International Corporation, is operated under the direction of Antoin Sedatt. Bellco is an independent investment center with approximately $72,000,000 of assets that gener...

Q: Obtain Berkshire Hathaway’s (Berkshire) Form 10-K for the

Obtain Berkshire Hathaway’s (Berkshire) Form 10-K for the year ended December 31, 2019, and complete the following requirements. To obtain the Form 10-K, you can use the EDGAR system (see Appendix A a...

Q: A widely recognized financial trick known as the “big bath”

A widely recognized financial trick known as the “big bath” occurs when a company makes huge unwarranted asset write-offs that drastically overstate expenses. Outside auditors (CPAs) permit companies...

Q: Waldon Corporation’s balance sheet shows that the company has $600,

Waldon Corporation’s balance sheet shows that the company has $600,000 invested in operating assets. During Year 2, Waldon earned $120,000 on $960,000 of sales. The companyâ
...

Q: Sorrento Corporation’s balance sheet indicates that the company has $500,

Sorrento Corporation’s balance sheet indicates that the company has $500,000 invested in operating assets. During Year 2, Sorrento earned operating income of $50,000 on $1,000,000 of sales. Required 1...

Q: Bonner Corporation’s balance sheet indicates that the company has $320,

Bonner Corporation’s balance sheet indicates that the company has $320,000 invested in operating assets. During Year 3, Bonner earned $24,000 of operating income on $480,000 of sales. Required 1. Comp...

Q: Carmen Douglas claims that her company’s performance evaluation system is unfair.

Carmen Douglas claims that her company’s performance evaluation system is unfair. Her company uses return on investment (ROI) to evaluate performance. Ms. Douglas says that even though her ROI is lowe...

Q: Keewee Company manufactures a single product for the military. Keewee Company

Keewee Company manufactures a single product for the military. Keewee Company had steady work, but it only had a return on investment of 6 percent. The CEO of Keewee Company did a test flight of Keewe...

Q: Leland Pharmaceuticals develops both over-the-counter (OTC)

Leland Pharmaceuticals develops both over-the-counter (OTC) and prescription medicines. It is organized into two divisions, which are evaluated as investment centers. The cost of capital used in evalu...

Q: Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has

Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial information (in thousands of dollars) for the first year of business foll...

Q: Houghton Chemicals, which started operations one year ago, has two

Houghton Chemicals, which started operations one year ago, has two divisions: Alloys and Petro. Both divisions invest heavily in R&D, which is assumed to generate benefits for five years. R&D...

Q: How is return on investment (ROI) computed?

How is return on investment (ROI) computed?

Q: Novell Electronics recently bought a patent that will allow it to bring

Novell Electronics recently bought a patent that will allow it to bring a new product to market in 2 1 2 years. Sales forecasts indicate that the product will increase the quarterly profits by $28,000...

Q: At what price would Arrowsmith Lumber be willing to purchase the timber

At what price would Arrowsmith Lumber be willing to purchase the timber rights described in Problem 4 if it requires a return on investment of 9%? Data from Problem 4: The timber rights to a tract of...

Q: Advantage Leasing Ltd. is in the business of purchasing equipment,

Advantage Leasing Ltd. is in the business of purchasing equipment, which it then leases to other companies. Advantage calculates the payments on its five-year leases so that it recovers the original c...

Q: An investor purchased a deferred annuity contract for $4608.07

An investor purchased a deferred annuity contract for $4608.07, a price calculated to provide a rate of return on investment of 9.75% compounded monthly. The semiannual payments of $400, once started,...

Q: Jasper Ski Corp. is studying the feasibility of installing a new

Jasper Ski Corp. is studying the feasibility of installing a new chair lift to expand the capacity of its downhill-skiing operation. Site preparation would require the expenditure of $1,900,000 at the...

Q: An investor is prepared to buy short-term promissory notes at

An investor is prepared to buy short-term promissory notes at a price that will provide him with a return on investment of 12%. What amount would he pay on August 9 for a 120-day note dated July 18 fo...

Q: It will cost A-1 Courier $1300 to convert a

It will cost A-1 Courier $1300 to convert a van from gasoline to natural gas fuel. The remaining useful life of the van is estimated at five years. To financially justify the conversion, what must be...

Q: An investor is considering the purchase of an existing closed mortgage that

An investor is considering the purchase of an existing closed mortgage that was written 20 months ago to secure a $45,000 loan at 10% compounded semiannually paying $500 per month for a four-year term...

Q: A capital project would require an immediate investment of $150,

A capital project would require an immediate investment of $150,000 and a further investment of $40,000 on a date four years from now. On the operating side, the project is expected to lose $30,000 in...

Q: A new machine that will lead to savings in labour costs of

A new machine that will lead to savings in labour costs of $16,000 per year can be purchased for $72,000. However, it will cost $1500 per year for the first four years and $2500 per year for the next...

Q: Capital Leasing leases commercial kitchen equipment to restaurants, hotels, hospitals

Capital Leasing leases commercial kitchen equipment to restaurants, hotels, hospitals, and other institutions. Capital Leasing calculates the payments on its four-year leases so that it recovers the p...

Q: A new machine that will lead to savings in labour costs of

A new machine that will lead to savings in labour costs of $20,000 per year can be purchased for $80,000. However, it will cost $2000 per year for the first four years, and $3000 per year for the next...

Q: A company is considering two mutually exclusive investment projects. Each requires

A company is considering two mutually exclusive investment projects. Each requires an initial investment of $25,000. Project A will generate an annual profit of $6000 for eight Page 637years and have...

Q: A landscaping business will buy one of three rototillers. The initial

A landscaping business will buy one of three rototillers. The initial cost, expected service life, and trade-in value (at the end of the service life) of each model are presented in the following tabl...

Q: What rate of return in the second year of an investment will

What rate of return in the second year of an investment will nullify a 25% return on investment in the first year?

Q: One year ago, Morgan invested $5000 to purchase 400 units

One year ago, Morgan invested $5000 to purchase 400 units of a mutual fund. He has just noted in the Financial Post that the fund’s rate of return on investment for the year was 22% and that the curre...

Q: Determine the IRR on the chairlift expansion in Problem 7 of Exercise

Determine the IRR on the chairlift expansion in Problem 7 of Exercise 17.2. Should the expansion be undertaken, given Jasper Ski Corp.’s required return of 7%? Data from Exercise 17.2 Problem 7: Jasp...

Q: Explain how direct marketing differs from advertising, and identify the major

Explain how direct marketing differs from advertising, and identify the major forms of direct media. (1) Would an iPhone app that streams QVC or another shopping channel to mobile phones be an effecti...

Q: John Branch is the managing partner of a business that has just

John Branch is the managing partner of a business that has just finished building a 60-room motel. Branch anticipates that he will rent these rooms for 16,000 nights next year (or 16,000 room-nights)....

Q: RightTime (RT) Corporation operates a retail store featuring wristwatches.

RightTime (RT) Corporation operates a retail store featuring wristwatches. It maintains an EOQ decision model to make inventory decisions. Currently, it is considering inventory decisions for its TagM...

Q: Fabulous Motor Company makes electric model cars and has two products,

Fabulous Motor Company makes electric model cars and has two products, the Simplegreen and the Fabulousgreen. To produce the Simplegreen, Fabulous Motor employed assets of $11,250,000 at the beginning...

Q: Accelerate Auto Company operates a new car division (that sells high

Accelerate Auto Company operates a new car division (that sells high-performance sports cars) and a performance parts division (that sells performance-improvement parts for family cars). Some division...

Q: The Mountainside Corporation manufactures similar products in the United States and Norway

The Mountainside Corporation manufactures similar products in the United States and Norway. The U.S. and Norwegian operations are organized as de- centralized divisions. The following information is a...

Q: The KateSteel Corporation is an automotive supplier that uses automatic turning machines

The KateSteel Corporation is an automotive supplier that uses automatic turning machines to manufacture precision parts from steel bars. KateSteel’s inventory of raw steel averages $...

Q: News Report Group has two major divisions: print and Internet.

News Report Group has two major divisions: print and Internet. Summary financial data (in millions) for 2019 and 2020 are as follows: The two division managers’ annual bonuses are ba...

Q: An online retailer wants to optimize its marketing portfolio budget to maximize

An online retailer wants to optimize its marketing portfolio budget to maximize its return on investment (ROI). The retailer has decided to allocate a AED 1,000,000 budget across three different campa...

Q: Use the appropriate factors from Table 6.4 or Table 6

Use the appropriate factors from Table 6.4 or Table 6.5 to answer the following questions. Required: a. Spencer Co.’s common stock is expected to have a dividend of $5 per share for each of the next 1...

Q: National Leasing is evaluating the cost of capital to use in its

National Leasing is evaluating the cost of capital to use in its capital budgeting process. Over the recent past, the company has averaged a return on equity of 13% and a return on investment of 10%....

Q: CarCare Garage Company is considering an investment in a new tune-

CarCare Garage Company is considering an investment in a new tune-up computer. The cost of the computer is $48,000. A cost analyst has calculated the discounted present value of the expected cash flow...

Q: Annual credit sales of Nadak Co. total $240 million.

Annual credit sales of Nadak Co. total $240 million. The firm gives a 2% cash discount for payment within 10 days of the invoice date; 90% of Nadak’s accounts receivable are paid within the discount p...

Q: Firm J has net income of $124,800, sales

Firm J has net income of $124,800, sales of $960,000, and average total assets of $640,000. Required: Calculate Firm J’s margin, turnover, and return on investment (ROI).

Q: Firm K has a margin of 9%, turnover of 1.

Firm K has a margin of 9%, turnover of 1.6, and sales of $4,000,000. Required: Calculate Firm K’s net income, average total assets, and return on investment (ROI).

Q: Firm M has a margin of 11%, turnover of 1.

Firm M has a margin of 11%, turnover of 1.4, sales of $840,000, and average stockholders’ equity of $400,000. Required: Calculate Firm M’s average total assets, net income, return on investment (ROI),...

Q: Chloroline Inc. has two million shares outstanding and no debt.

Chloroline Inc. has two million shares outstanding and no debt. Earnings before interest and tax (EBIT) are projected to be $15 million under normal conditions, $5 million for a downturn in the econom...

Q: Go to www.pearsonhighered.com/ sullivanstats to obtain the

Go to www.pearsonhighered.com/ sullivanstats to obtain the data file 12_3_17. The variable “Cost” represents the four-year cost including tuition, supplies, room and board, the variable “Annual ROI” r...

Q: Payscale.com tracks the graduates of all institutions of higher education

Payscale.com tracks the graduates of all institutions of higher education and determines the return on investment (ROI) of the school’s graduates. ROI can be thought of as the investment return on the...

Q: Go to www.pearsonhighered.com/ sullivanstats to obtain the

Go to www.pearsonhighered.com/ sullivanstats to obtain the data file 4_1_49 using the file format of your choice for the version of the text you are using. The data represent the cost, return on inves...

Q: Go to www.pearsonhighered.com/ sullivanstats to obtain the

Go to www.pearsonhighered.com/ sullivanstats to obtain the data file 4_2_28 using the file format of your choice for the version of the text you are using. The variable “Cost” represents the four-year...