Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 2-4 (Algo) As the operations manager for Valley Kayaks (as described in the previous problem), you find yourself faced with an interesting situation. Marketing

image text in transcribed

Problem 2-4 (Algo) As the operations manager for Valley Kayaks (as described in the previous problem), you find yourself faced with an interesting situation. Marketing has informed you that they have lost a number of sales because of a lack of inventory. Kayaks, being seasonal in nature, have to be in stock at your dealers if they are to be sold (customers are not willing to wait). The director of marketing proposes that you increase inventories by 15 percent (a major investment to you). She has also given the information in the following table. Use Figure 2.3. Proposed Impact of Category Current Values Inventory Increase Sales $ 4,480,000 35% + (improvement) Cost of goods sold $ 3,200,000 0% Variable expenses 640,000 5% - reduction Fixed expenses 224,000 25% + (increase) Inventory 333,000 15% + Accounts receivable $ 207,000 0% Other current assets $ 663,000 0% Fixed assets 663,000 0% $ $ $ a.Using the information given, complete the following table and calculate the ROA for current values and new values. (Round "ROA" to 2 decimal places.) New Values Category Sales Cost of goods sold Variable expenses Fixed expenses Inventory Accounts receivable Other current assets Fixed assets ROA Current Values $ 4,480,000 $ 3,200,000 $ 640,000 $ 224,000 $ 333,000 $ 207.000 $ 663.000 $ 663.000 % % b. Would the projected change in ROA justify the inventory investment? Yes No

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_2

Step: 3

blur-text-image_3

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

Accounting For Managers And Entrepreneurs

Authors: Charles T. Horngren

8th Edition

1269778684, 9781269778688

More Books

Students also viewed these Accounting questions

Question

Compare wages in Romania to wages in your home country.

Answered: 1 week ago

Question

Which were the causes of high employee turnover at Fomco Group?

Answered: 1 week ago