Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Your friend Stacy Brooks works directly under the manager of the Patio Division of the company. For the year just ended, the income statement and

image text in transcribed
Your friend Stacy Brooks works directly under the manager of the Patio Division of the company. For the year just ended, the income statement and asset investment information is as follows: The Patio Division manager (Stacy's boss) is out sick today. The president of the company (Daisy Jones) said that the Division's rate of return must be increased to at least 15% by the end of the next year if operations in this area are to continue. Stacy's boss has developed three proposals, and President Jones has asked Stacy to work with you and electronically send up to her office some numerical analysis and discussion of each proposal: Proposal #1: Transfer some equipment to other divisions at no gain or loss and use rented manufacturing equipment instead. This would reduce the invested assets by $312,500 but increase cost of goods sold (because the rent is a product cost) by $105,000 per year. Proposal #2: Purchase new and more efficient equipment which would increase depreciation but overall still result in a net decrease in the cost of goods sold by $560,000 per year. Sales would remain unchanged, and the old equipment, which is depreciated out, would be scrapped at no gain or loss. The new equipment would increase invested assets by an additional $1,875,000. Proposal #3: Reduce invested assets by discontinuing a product line. This action would eliminate sales of $595,000 per year, reduce cost of goods sold by $386,750 per year, and reduce operating expenses by $119,000 per year. Assets of $1,120,000 would be transferred to other divisions at no gain or loss. (CONTINUED, NEXT PAGE) Create a spreadsheet with input cells containing all of the above information as well as an output section that: (o) provides the DuPont net profit margin ratio, asset turnover ratio, rate of return on investment, and residual income (using the 15% rate) for the current situation (p) provides an projected income statement and provides the amount of invested assets for Proposal #1 (q) provides the DuPont net profit margin ratio, asset tumover ratio, rate of refurn on investment, and residual income for Proposal #1 (r) provides an projected income statement and provides the amount of invested assets for Proposal #2 (s) provides the DuPont net profit margin ratio, asset furnover ratio, rate of return on investment, and residual income for Proposal #2 (t) provides an projected income statement and provides the amount of invested assets for Proposal H3 (u) provides the DuPont net profit margin ratio, asset turnover ratio, rate of return on investment, and residual Your friend Stacy Brooks works directly under the manager of the Patio Division of the company. For the year just ended, the income statement and asset investment information is as follows: The Patio Division manager (Stacy's boss) is out sick today. The president of the company (Daisy Jones) said that the Division's rate of return must be increased to at least 15% by the end of the next year if operations in this area are to continue. Stacy's boss has developed three proposals, and President Jones has asked Stacy to work with you and electronically send up to her office some numerical analysis and discussion of each proposal: Proposal #1: Transfer some equipment to other divisions at no gain or loss and use rented manufacturing equipment instead. This would reduce the invested assets by $312,500 but increase cost of goods sold (because the rent is a product cost) by $105,000 per year. Proposal #2: Purchase new and more efficient equipment which would increase depreciation but overall still result in a net decrease in the cost of goods sold by $560,000 per year. Sales would remain unchanged, and the old equipment, which is depreciated out, would be scrapped at no gain or loss. The new equipment would increase invested assets by an additional $1,875,000. Proposal #3: Reduce invested assets by discontinuing a product line. This action would eliminate sales of $595,000 per year, reduce cost of goods sold by $386,750 per year, and reduce operating expenses by $119,000 per year. Assets of $1,120,000 would be transferred to other divisions at no gain or loss. (CONTINUED, NEXT PAGE) Create a spreadsheet with input cells containing all of the above information as well as an output section that: (o) provides the DuPont net profit margin ratio, asset turnover ratio, rate of return on investment, and residual income (using the 15% rate) for the current situation (p) provides an projected income statement and provides the amount of invested assets for Proposal #1 (q) provides the DuPont net profit margin ratio, asset tumover ratio, rate of refurn on investment, and residual income for Proposal #1 (r) provides an projected income statement and provides the amount of invested assets for Proposal #2 (s) provides the DuPont net profit margin ratio, asset furnover ratio, rate of return on investment, and residual income for Proposal #2 (t) provides an projected income statement and provides the amount of invested assets for Proposal H3 (u) provides the DuPont net profit margin ratio, asset turnover ratio, rate of return on investment, and residual

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

Occupational Fraud And Abuse

Authors: Joseph T. Wells

1st Edition

1889277088, 978-1889277080

More Books

Students also viewed these Accounting questions

Question

5. If yes, then why?

Answered: 1 week ago

Question

6. How would you design your ideal position?

Answered: 1 week ago