Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Baba Bicycles Ltd makes bicycles and has only two products, the wind and the cooler. To produce the wind, Baba employed assets of $2,150,000 at
Baba Bicycles Ltd makes bicycles and has only two products, the wind and the cooler. To produce the wind, Baba employed assets of $2,150,000 at the beginning of the period, and $1,750,000 of assets at the end of the period. Other costs to manufacture the wind include:
- Direct materials: $665 per unit
- Set-up: $325 per set-up hour
- Production: $182 per machine hour
In addition, general administration and selling costs total $78,500 for the period. In the current period, Baba produced 6,300 Tornado bicycles using 655 set-up-hours and 27,500 machine-hours. Baba sold these bicycles for $1,550 each.
- Assuming that Baba defines investment as average assets during the period, what is the return on investment (ROI) for the wind's division?
- Calculate the residual income (RI) for the wind Division if Baba has a required rate of return of 11.5% on investments.
- The performance of the wind department's manager is evaluated on the basis of ROI. Describe 4 underlying issues in relation to measuring a manager's performance based on ROI and other financial measures.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started