Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial information (in thousands of dollars) for the first year of business follow Sales revenue Income Divisional assets (beginning of year) Current liabilities (beginning of year) R&D expendituresa Carolinas $ 2,400 160 1,000 320 1,200 Northeast $ 7,200 372 1,500 320 1,120 aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming Lasky Manufacturing uses residual income. a-2. Which division had the better performance?

Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial information (in thousands of dollars) for the first year of business follow Sales revenue Income Divisional assets (beginning of year) Current liabilities (beginning of year) R&D expendituresa Carolinas $ 2,400 160 1,000 320 1,200 Northeast $ 7,200 372 1,500 320 1,120 aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming Lasky Manufacturing uses residual income. a-2. Which division had the better performance?

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter9: Metric-analysis Of Financial Statements

Section: Chapter Questions

Problem 9.2.2P

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