1. The income statement comparison for Forklift Material Handling shows the income statement for the current and prior year.

   FORKLIFT MATERIAL HANDLING Income statement Comparison
   	Current Year		Prior Year
   (Amounts in thousands)
   Sales	$33,750		$24,750
   Cost of goods sold	21,937.5		16,830
   Gross profit	$11,812.5		$7,920
   Expenses:
   Wages	$8,775		$6,188
   Utilities	675		300
   Repairs	169		350
   Selling	506		300
   Total Expenses	$10,125		$7,138
   Operating income	?		?
   Operating income %	?		?
   Total assets (investment base)	$4,600		$1,400
   Return on investment	?		?
   Residual income (8% cost of capital)	?		?

   A. Determine the operating income (loss) (dollars) for each year. If required round final answers to two decimal places.

   	Current Year		Prior Year
   Operating income (loss)	$___		$___

   B. Determine the operating income (loss) (percentage) for each year. If required round final answers to two decimal places.

   	Current Year		Prior Year
   Operating income (loss)	___%		___%

   c. The company made a strategic decision to invest in additional assets in the current year. These amounts are provided. Using the total assets amounts as the investment base, calculate the return on investment. Was the decision to invest additional assets in the company successful? If required round final answers to two decimal places.

   	Current Year		Prior Year
   Return on investment	___%		___%

   (Successful, Unsuccessful)

   D. Assuming an 8% cost of capital, calculate the residual income for each year. Do not round intermediate computations and round final answers to nearest whole dollar. For those boxes in which you must enter subtractive or negative numbers use a minus sign.

   	Current Year		Prior Year
   Residual income	$___		$___

   The residual income related to the investment (increased, decreased) in the current year. This (conflicts, confirms) with the ROI results. Management (should, should not) consider both methods in their analysis of the investment.