Question
a) The income statement comparison for Rush Delivery Company shows the income statement for the current and prior year. Rush delivery company income statement comparison
a) The income statement comparison for Rush Delivery Company shows the income statement for the current and prior year.
Rush delivery company
income statement comparison
current year prior year
(amount in thousands ).
sales $15000 $11000
cost of goods sold 9750 7480
gross profit $5250 $3520
wages $3900 $3080
utilities 300 250
repairs 75 325
selling 225 200
total expenses $4500 $3855
operating income/(loss) ? ?
operating income/( loss )%. ? ?
total assets(investment base) $4500 $1500
return of investment ? ?
residual income(8%cost of capital). ? ?
Required:
a) Determine the operating income (loss) for each year.
b) Determine the operating income (% of sales) for each year.
c) The company made a strategic decision to invest in additional assets in the current year. These amounts are provided. Using the total assets amounts as the investment base, calculate the ROI. Was the decision to invest additional assets in the company successful? Explain.
d) Assuming an 8% cost of capital, calculate the RI for each year. Explain how this compares to your findings in (c).
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