Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Since 1981, family-owned Southern Tool has grown into the ultimate destination for hard working do-it-yourselfers and professionals. Southern Tool Corporation has two divisions: Hand Tools

image text in transcribed
image text in transcribed
image text in transcribed
Since 1981, family-owned Southern Tool has grown into the ultimate destination for hard working do-it-yourselfers and professionals. Southern Tool Corporation has two divisions: Hand Tools and Power Tools, Selected financial Information for the two divisions follow: Sales Het operating incone Average operating assets Division Hand Tool Power Tool $ 10,600,000 $ 36,000,000 $ 742,000 53,240,000 5 2,650,000 $18,000,000 Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16%. Compute the residual income for each division 3. Is the Power Tool Division's greater amount of residual income an indication that it is better managed? Complete this question by entering your answers in the tabs below. Heged Hequired Required for each diveston, compute the return on investment (ROI) in terms of margin and turnover Hand Tool Towne Tool ROL Required 2 > Since 1981, family-owned Southern Tool has grown into the ultimate destination for hard working do-it-yourselfers and professionals. Southern Tool Corporation has two divisions: Hand Tools and Power Tools, Selected financial information for the two divisions follow: Sales liet operating income Average operating assets Division Hand Tool Power Tool $ 10,600,000 $ 36,000,000 $ 742,000 $3,240,000 $ 2,650,000 $18,000,000 Required: 1. For each division, compute the return on investment (Ron in terms of margin and turnover. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16% Compute the residual income for each division, 3. Is the Power Tool Division's greater amount of residual income an indication that it is better managed? Complete this question by entering your answers in the tabs below. Required: Required 2 Required 3 Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16%: Compute the residual income for each division Hand Tool Power Tool Residual income Since 1981, family-owned Southern Tool has grown into the ultimate destination for hard working do-it-yourselfers and professionals Southern Tool Corporation has two divisions: Hand Tools and Power Tools. Selected financial information for the two divisions follow Sales Net operating income Average operating assets Division Hand Tool Power Tool $ 10,600,000 $ 36,000,000 $ 742,000 $3,240,000 $ 2,650,000 $ 18,000,000 Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16%. Compute the residual income for each division 3. Is the Power Tool Division's greater amount of residual income an indication that it is better managed? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 is the Power Tool's Division greater amount of residual income an indication that it is better managed? 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

Managerial accounting

Authors: ramji balakrishnan, k. s i varamakrishnan, Geoffrey b. sprin

1st edition

471467855, 978-0471467854

More Books

Students also viewed these Accounting questions

Question

compare and contrast positivity and negativity;

Answered: 1 week ago