Betsy Union is the Crane Company manager and her performance is evaluated by executive management based on Division ROI. The current controllable margin for Crane Company is $58000. Its current operating assets total $220000. The division is considering purchasing equipment for $40000 that will increase contribution margin by an estimated $13000, with annual depreciation of $13000. If the equipment is purchased, how will the return on investment for the division change? O It will remain unchanged O A decrease of 0.9% O An increase of 0.9% O A decrease of 4.1%
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- Lucas is the X Division manager and his performance is evaluated by executive management based on Division ROI. The current controllable margin for X Division is P46,000. Its current operating assets total P210,000. The division is considering purchasing equipment for P40,000 that will increase sales by an estimated P10,000, with annual depreciation of P10,000. If the equipment is purchased, what is the new ROI (round-off the final answer to one decimal places)?Hoffman Ceramics, a division of Fielding Corporation, has an operating income of $64,000 and total assets of $400,000. The required rate of return for the company is 10%. 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 Hoffman Ceramics has the opportunity to undertake a new project that will require an investment of $100,000. This investment would earn $14,000 for the company. Read the requirements. From the standpoint of Fielding Corporation this investment is is more than Fielding's required rate of return. desirable. The ROI of the investment opportunity Requirement 4. What would the residual income (RI) be for Hoffman Ceramics if this investment opportunity were to be undertaken? Would the manager of the Hoffman Ceramics division want to make this investment if she were evaluated based on RI? Why or why not? First determine the formula to calculate the RI.…The Magellan Division of Global Corporation, which has income of $250,000 and an asset investment of $1,562,500, is studying an investment opportunity that will cost $450,000 and yield a profit of $67,500. Assuming that Global uses an imputed interest charge of 14%, would the investment be attractive to:1—Divisional management if ROI is used to evaluate divisional performance?2—Divisional management if residual income (RI) is used to evaluate divisional performance?3—The management of Global Corporation? Attractive to Magellan: ROI Attractive to Magellan: RI Attractive to Global a. Yes; Yes; Yes b. Yes; No; Yes c. No; Yes; Yes d. No; No; No
- I need some help with this one. Return on Investment and Residual Income Skyview Company has two divisions, Residential Skylights and Automotive Sunroofs. The manager of the Residential Skylights Division is evalu- ated based on return on investment (ROI). The manager of the Automotive Sunroofs Division is evaluated based on residual income.The required return is 12% and the return on investment has been 16% for the two divisions. Each manager is currently considering a project with the following projections (in$000s): Residential Skylights Automotive Sunroofs Projected operating income $350 $560 Investment in operating assets $2,500 $4,000 Required a. What is the Residential Skylights’ ROI? b. What is Automotive Sunroofs’ residual income? c. According to the current evaluation system for managers, which manager(s) would have incen- tive to undertake the projectRoy Toys, a division of Fun Corp. has a net operating income of $60,000 and average operating assets of $300000. 1. The required rate of return for the company is 15%. What is the division's ROI?a. 25%b. 5%c. 15%d. 20% 2. If the manager of the division is evaluated based on ROI, will she want to make an investment of $100000 that would generate an additional net operating income of $18000 per year?a. Yesb. NoJohn Ltd is an organization with two divisions: A and B, each with its own cost and revenue streams. Each of the two divisions is classified as Investment center. The company’s cost of capital is 9%. Historically, investment decisions have been made by calculating the return on investment (ROI). A new manager who has recently been appointed in division A has argued that using residual income (RI) to make investment decisions would result in ‘better goal congruence’ throughout the company. The data below shows the current position of the division as at the end of 31 December, 2019: Details of Projects Project A Project B Capital required GH¢ 82.8 million GH¢ 40.6 million Sales generated GH¢44.6 million GH¢ 21.8 million Net Profit margin 18% 25% The company is seeking to maximize shareholders wealth. Assuming that, Division A acquires a more efficient asset at GH¢17 million and Division B sold one of its assets with written down value of GH¢21 million, and profits are expected to…
- 1. Roy Toy, a division of Fun Corp. has a net operating income of $60000 and average operating assets of $300000. The required rate of return for the company is 15%. What is the division's residual income? a. $240000 b. $45000 c. $15000 d. $51000 2. If the manager of Roy To division is evaluated based on residual income, will she want to make an investment of $100000 that would generate an additional net operating income of $18000 per year?a. Yesb. NoDarren Dillard, majority stockholder and president of Dillard, Inc., is working with his top managers on future plans for the company. As the company’s managerial accountant, you’ve been asked to analyze the following situations and make recommendations to the management team. Requirements Division A of Dillard, Inc. has $5,250,000 in assets. Its yearly fixed costs are $557,000, and the variable costs of its product line are $1.90 per unit. The division’s volume is currently 500,000 units. Competitors offer a similar product, at the same quality, to retailers for $4.25 each. Dillard’s management team wants to earn a 12% return on investment on the divisions assets. What is Division A’s target full product cost? Given the division’s current costs, will Division A be able to achieve its target profit? Assume Division A has identified ways to cut its variable costs to $1.75 per unit. What is its new target fixed cost? Will this decrease in variable costs allow the division to achieve…Which of the choices best describe the statements below? Statement 1: Department A has operating profit of 30000, operating assets of 100000, imputed interest of 12000, return on investment is 30% and residual income of 18000. An additional investment of 10000 is offered that will increase operating income by 1400. Department A manager would resist the new investment if they were to be judged on Residual Income, but would welcome the investment if they were judged according to ROI since there would be decrease of 200 in residual income from the investment and an increase of 1.5% in ROI Statement 2: If transfer prices are to be based on cost, then the costs should be actual costs rather than standard costs Statement 3: A segment margin is computed by deducting variable and traceable fixed expenses from the sales of a segment Statement 4: Labor turnover rate. Percentage of revenue generated by new products and services and Average time taken to develop new products and services are…
- Bersatu Berhad splits into two divisions, A and B, each with their own cost and revenué streams. Each of the divisions is managed by a divisional manager who has the power to make all investment decisions within the division. The cost of capital for both divisions is 12%. Historically, investment decisions have been made by calculating the return on investment (ROI) of any opportunities and at present. A new manager who has recently been appointed in division A has argued that using residual income (RI) to make investment decisions would result in 'better goal congruence' throughout the company. Each division is currently considering the following separate investments: Project for Division A Project for Division B Capital requirement for investment Sales generated by investment Net profit margin RM82.8 million RM40.6 million RM21.8 million RM44.6 million 28% 33% The company is seeking to maximise shareholder wealth. Required: Calculate both the return on investment and residual income…Bersatu Berhad splits into two divisions, A and B, each with their own cost and revenue streams. Each of the divisions is managed by a divisional manager who has the power to make all investment decisions within the division. The cost of capital for both divisions is 12%. Historically, investment decisions have been made by calculating the return on investment (ROI) of any opportunities and at present.A new manager who has recently been appointed in division A has argued that using residual income (RI) to make investment decisions would result in ‘better goal congruence’ throughout the company. Each division is currently considering the following separate investments: Project for Division A Project for Division B Capital requirement for investment RM 82.8 million RM40.6 million Sales generated by investment Rm44.6 million Rm21.8 million Net profit margin 28% 33% The company is seeking to maximise shareholder wealth. Required: Calculate both the return on investment and…The New York Division of Ram Co. currently earns an ROI of 18%. The department manager is considering a new project, which requires a $100,000 investment in operating assets and generates a net operating income of $16,000. Assume that the company’s minimum required rate of return is 14%. Which of the following statement is true? a)If the manager is evaluated based on ROI, she will make the new investment because it increases the department’s ROI by 2%. b)If the manager is evaluated based on ROI, she will make the new investment because it generates an ROI that is 2% greater than the company’s minimum required rate of return. c)If the manager is evaluated based on residual income, she will make the new investment because it increases the department’s residual income by $2,000. d)If the manager is evaluated based on residual income, she will not make the new investment because it decreases the department’s residual income by $2,000.