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Question 6 - (10 marks) The Toolbox Shop is a large retailer of toolboxes for installation on pickup trucks. An income statement for the company's
Question 6 - (10 marks) The Toolbox Shop is a large retailer of toolboxes for installation on pickup trucks. An income statement for the company's toolbox department for the most recent quarter is presented below: Toolbox Shop Income Statement - Truck Toolbox Department For the 4th Quarter of 2016 Sales (2.500 units @ $450 each) Less cost of goods sold Gross Margin Less operating expenses: Selling expenses 200,000 Administrative expenses 150,000 Profit $1,125.000 562.500 562.500 350.000 $212,500 The department's cost of goods sold is a variable expense. The total selling expenses of $200.000 is made up of $125.000 that is fixed and the remainder is variable with respect to the number of units. The administrative expenses are 35% variable and 65% fixed. Prepare an income statement for the quarter, using the contribution margin approach Question 8 (10 marks) Waterloo Co. has four operating divisions with the following infor- mation for the most recent fiscal year. Division Sales Net operating income Average operating assets $15,000,000 $750,000 $4,000,000 BC $20,000,000 $25,000,000 $10,000,000 $1,000,000 $800.000 $750,000 $7,000,000 $5,000,000 $6.000.000 Return on Investment Note: The minimum rate of return set by company management is 14%. a. Calculate the return on investment for each division. b. Which divisions are meeting the rate of return set by manage- ment? c. If the divisions were each offered an opportunity to add an in- vestment that would result in a 17% ROI, which division would be less likely to accept the new opportunity
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