Question 1
Results from Optimum Corporation's most recent year of operations are presented in the following table.
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Requirements
1.
Calculate the salesmargin, capitalturnover, and return on investment(ROI).
2.
Calculate the residual income(RI).
Results from Optimum Corporation's most recent year of operations are presented in the following table. a (Click the icon to view the information.) Requirements 1. Calculate the sales margin, capital turnover, and return on investment (ROI). 2. Calculate the residual income (RI). Requirement 1. Calculate the sales margin, capital turnover, and return on investment (ROI). 0 Data Table First enter the formula, then calculate the sales margin. + = Sales margin Operating income ........... $ 8,800 Total assets ................ $ 16,000 Current liabilities ............ $ 4,500 Sales ...................... $ 35,200 Target rate of return Choose from arm dron-down list and then click Check Answer. Gable Ceramics, a division of Alderman Corporation, has an operating income of $85,000 and total assets of $425,000. The required rate of return for the company is 13%. The company is evaluating whether it should use return on investment (ROI) or residual income (RI) as a measurement of performance for its division managers. The manager of Gable Ceramics has the opportunity to undertake a new project that will require an investment of $175,000. This investment would earn $24,500 for the company. Read the uirements. Requirement 1. What is the original return on investment (ROI) for Gable Ceramics (before making any additional investment)? First determine the formula to calculate the ROI. + Shoose from any drop-down list and then click Check Answer. ROI 0 Requirements 1. What is the original return on investment (ROI) for Gable Ceramics (before making any additional investment)? 2. What would the ROI be for Gable Ceramics if this investment opportunity were undertaken? Would the manager of the Gable Ceramics division want to make this investment if she were evaluated based on ROI? Why or why not? . What is the ROI of the investment opportunity? Would the investment be desirable from the standpoint of Alderman Corporation? Why or why not? . What would the residual income (RI) be for Gable Ceramics if this investment opportunity were to be undertaken? Would the manager of the Gable Ceramics division want to make this investment if she were evaluated based on RI? Why or why not? . What is the RI of the investment opportunity? Would the investment be desirable from the standpoint of Alderman Corporation? Why or why not? . Which performance measurement method, ROI or RI, promotes goal congruence? Why? Q The following table contains a hypothetical partial master budget performance report for Fun Time Fudge Company. Click the icon to view the partial master budget performance report.) Fill in the missing amounts. Be sure to indicate whether variances are favorable (F) or unfavorable (U). (Enter the variances as positive numbers. Label each variance as favorable (F) or unfavorable (U). If the variance is 0, make sure to enter in a "0". Avariance of zero is considered favorable.) Fun Time Fudge Company Flexible Budget Performance Report: Sales and Operating Expenses For Year Ended December 31 Flexible Budget Flexible Actual Variance Budget Volume Variance Master Budget Sales volume (number of cases sold) 13,300 13,300 12,600 Sales revenue ($27 per case) $ 353,100 $ 359,100 $ 340,200 Less variable expenses: Sales expense ($2 per case sold) $ 24,000 $ 26,600 $ 25,200 Shipping expense ($3 per case sold) 39,100 39,900 37,800 Contribution margin 290,000 292,600 277,200 Choose from any list or enter any number in the input fields and then click Check Answer. i Data Table - X A B C D E F Fun Time Fudge Company 2 Flexible Budget Performance Report: Sales and Operating Expenses 3 For the Year Ended December 31 Flexible Budget Flexible Volume Master 4 Actual Variance Budget Variance Budget 5 Sales volume (number of cases sold) 13,300 13,300 12,600 6 Sales revenue ($27 per case) $ 353, 100 $ 359, 100 $ 340,200 7 Less variable expenses: 8 Sales expense ($2 per case sold) $ 24,000 $ 26,600 $ 25,200 9 Shipping expense ($3 per case sold) 39,100 39,900 37,800 10 Contribution margin 290,000 292,600 277,200 11 Less fixed expenses: 12 Salaries 11,600 10,800 10,800 13 Office rent 3,200 3,200 3,200 Print Done
