Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I want solutions and explanations for part A, and reference for part b, thank you for your time and work!! The president feels very strongly

I want solutions and explanations for part A, and reference for part b, thank you for your time and work!! image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
The president feels very strongly that Mountain Sports should expand operations to a second location. She has even found a prime location in Canmore, Alberta, One of the great things about Canmore is its proximity to the mountains, and its only about 10 minutes away from this beautiful, vibrant and internationally known Banff tourist town. Research indicates that the Canmore market is well suited to both cross-country skis and bikes that competition is fairly limited. The investment in assets (cash, inventory, equipment) required for the new Minimum required return on investments Actual 2019 return on investment of the original location $ 169,000 16% 17% Management has provided the following income statement to the bank manager the expected Static Budget % Amount Sales in Units 4,208 Sales 526,000 100% Less: Variable Costs: Cost of Goods Sold 221,000 42% Sales Commissions 78.900 15% Total Variable Costs 299.900 57% Contribution Margin 226,100 43% Less: Fixed Costs: Advertising 24,000 Property Taxes 9,000 Rent 50,000 Salaries & Wages 103,000 Total Fixed Costs 186.000 Net Operating Income 40.100 Part A: (4 marks) Calculate the following performance measurements for the proposed Canmore expansion: Margin (see Chapter 11 notes) Turnover (use investment in assets in equation) Return on Investment Residual Income Part B: Analysis (4 marks) Explain in your own words using case data. Marks will not be awarded for textbook definitions). a. If management is evaluated based on ROI, will the project be accepted (expansion into Canmore)? Why or why not? b. If management is evaluated based on residual income, will the expansion into Canmore be accepted? Why or why not

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Facilities Managers Reference Management Planning Building Audits Estimating

Authors: Harvey H. Kaiser

1st Edition

0876291426, 978-0876291429

More Books

Students also viewed these Accounting questions