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Performance Measurement (Problem Solving)
ROI = Profit Margin Asset Turnover .20=PM x 5 PM = ROI/Asset Turnover PM = .04or4% - โ A division of Shamrock Corporation reported a return on investment of 20% for a recent period. If the division's asset turnover was 5, its profit margin must have been ROI = Income / Assets Invested Income = Residual Income + (Target Rate * Assets) = $270,000 + (.10 * $1,800,000) = $450, ROI = $(450,000/1,800,000) = 25% - โ The Dessert Division of Incredible Edibles Corporation has the following segment information: Assets available for use - 1,800, Target rate of return - 10% Residual income - 270, What was Dessert Division's return on investment? ROI = Income / Assets Invested Income = Residual Income + (Target Rate * Assets) = $300,000 + (.12 * $2,500,000) = $600, ROI = $(600,000/2,500,000) = 24% - โ The Television Division of Electronics Corporation has the following segment information: Assets available for use - 2,500, Target rate of return - 12% Residual income - 300, What was Television Division's return on investment?
Segment Income = ROI * BV of Total Assets = 0.15 * $1,000, = 150,000 - โ The Magazine Division of Continental Publishing Company had the following financial data for the year: Assets available for use - 1,000,000 Book Value 1,500,000 Market Value Residual Income - 100, Return on Investment - 15% What was the Magazine Division's segment income? Net Income - (Target Rate Asset Base) = Residual Income $150,000 - (Target Rate $1,000,000) = $100, (Target Rate $1,000,000) = $50, Target Rate = 5.0% - โ The Magazine Division of Continental Publishing Company had the following financial data for the year: Assets available for use - 1,000,000 Book Value 1,500,000 Market Value Residual Income - 100, Return on Investment - 15% What was the target rate of return for Continental Publishing Company? $50,000 / 0.15 = $333,333 - โ The Magazine Division of Continental Publishing Company had the following financial data for the year: Assets available for use - 1,000,000 Book Value 1,500,000 Market Value Residual Income - 100, Return on Investment - 15% If the manager of the Magazine Division is evaluated based on return on investment, how much would she be willing to pay for an investment that promises to increase net segment income by $50,000?
Residual income - 108, ROI - 14% If the manager of the Basketball Division is evaluated based on return on investment, how much would she be willing to pay for an investment that promises to increase net segment income by $60,000? return on investment would decrease. - โ The Basketball Division of Thunder Sports Enterprises reported the following financial data for the year: Assets available for use - 1,200,000 book value 1,500,000 market value Residual income - 108, ROI - 14% If expenses increased by $15,000 in the Basketball Division, EVA = After Tax Net Income - (Cost of Capital Market Value of Assets) EVA = (($2,000,000 * .25) .60) - (.10 $3,600,000) EVA = $(300,000 - 360,000) EVA = $(60,000) - โ Ann Arbor Division of the Michigan Company has the following statistics for its most recent operations: Assets available for use (Market Value) - 3,600, Assets available for use (Book Value) - 2,000, Ann Arbor Division's return on investment - 25% Ann Arbor Division's residual income - 200, Return on investment (entire Michigan Company) - 20% Compute EVA assuming the cost of capital is 10% and the tax rate is 40%. Net Income - (Target Rate of Return Total assets) = Residual Income $500,000 - (Target Rate of Return * $2,000,000) = $200, Target Rate of Return * $2,000,000 = $300, Target Rate of Return = 15% - โ Ann Arbor Division of the Michigan Company has the following statistics for its most recent operations:
Assets available for use (Market Value) - 3,600, Assets available for use (Book Value) - 2,000, Ann Arbor Division's return on investment - 25% Ann Arbor Division's residual income - 200, Return on investment (entire Michigan Company) - 20% What is the target rate of return in Michigan Company? $100,000 * .25 = $25,000 - โ Ann Arbor Division of the Michigan Company has the following statistics for its most recent operations: Assets available for use (Market Value) - 3,600, Assets available for use (Book Value) - 2,000, Ann Arbor Division's return on investment - 25% Ann Arbor Division's residual income - 200, Return on investment (entire Michigan Company) - 20% If Michigan Company evaluates its managers on the basis of return on investment, the manager of Ann Arbor Division would invest in a project costing $100,000 only if it increased net segment income by at least 0.20 - 0.15 = 0.05 residual income $10,000 / 0.05 = $200,000 - โ Carter Corporation has a target return of 15%. If a prospective investment has an estimated return on investment of 20%, and a residual income of $10,000, what is the estimated cost of the investment? (ROI Total Assets) - (Target Rate Total Assets) = Residual Income (ROI * $1,000,000) - (0.12 * $1,000,000) = $150, (ROI * $1,000,000) = $270, ROI = 27% - โ The Jewelry Division of Genuine Gems Company is considering an investment in a new project. The project has an estimated cost of $1,000,000. If Genuine Gems Company has a target rate of return of 12%, how large does the return on investment on this project need to be to generate $150,000 of residual income? $15,000/0.10 = $150,000 - โ In the South Division of Occident Company, segment income for the most recent year exceeded residual income by $15,000.
For the most recent year, what was Waterloo Division's return on investment? Profit Margin = Gross Margin/Sales =$(1,750,000/8,000,000) =22% - โ The Lumber Division of Home Innovations Company reported the following results for a recent year Sales - 8,000, Expenses - 6,250, Total asset (1/31) - 5,000, Total assets (12/31) - 5,400, What was the profit margin for the Lumber Division? $8,000,000/($((5,000,000 + 5,400,000)/2) = 1.538 - โ The Lumber Division of Home Innovations Company reported the following results for a recent year Sales - 8,000, Expenses - 6,250, Total asset (1/31) - 5,000, Total assets (12/31) - 5,400, What was the asset turnover ratio of the Lumber Division? Profit Margin = Gross Margin/Sales =$(1,500,000/9,000,000) =16.7% round to 17% - โ The Appliance Division of Electrotech Corporation reported the following results for a recent year Sales - 9,000, Expenses - 7,500, Total assets (1/1) - 6,000, Total assets (12/31) - 6,200, What was the profit margin for The Appliance Division? $9,000,000/($((6,000,000 + 6,200,000)/2) = 1.475 - โ The Appliance Division of Electrotech Corporation reported the following results for a recent year
Sales - 9,000, Expenses - 7,500, Total assets (1/1) - 6,000, Total assets (12/31) - 6,200, What was the asset turnover ratio of The Appliance Division? (Net Income) - (Target Rate Total Assets) = Residual Income ($5,000,000) - (0.20 * Total Assets) = $2,000, (0.20 * Total Assets) = $3,000, Total Assets = $15,000, ROI = (5,000,000/15,000,000) ROI = 33% - โ Triumph Division of Traveling Fantasies, is evaluated based on residual income generated. In the most recent year, the Triumph Division generated a residual income of $2,000,000 and net income of $5,000,000. The target rate of return for all divisions of Traveling Fantasies is 20%. What was the return on investment for the Triumph Division? 20,000/30,000 * 50,000/20,000 * 40,000/50,000 = 1.3 units - โ Mobile Company is a manufacturer of electronic components. The following manufacturing information is available for the month of May: Good units manufactured - 40, Value-added hours of manufacturing time - 20, Total units manufactured - 50, Total hours of manufacturing time - 30, What is the throughput per hour? 40,000/50,000 = 80% - โ Mobile Company is a manufacturer of electronic components. The following manufacturing information is available for the month of May: Good units manufactured - 40, Value-added hours of manufacturing time - 20, Total units manufactured - 50, Total hours of manufacturing time - 30, What is the process quality yield?
Good units produced - 200, Units started in production - 250, Processing time (budgeted hours) - 425 Processing time (total hours) - 400 Value-added processing time - 300 What is the throughput per hour in the Tray Production Department? 250,000/300 = 833 units (rounded) - โ One of the products manufactured by Buxton Company is a plastic tray. The information below relates to the Tray Production Department: Good units produced - 200, Units started in production - 250, Processing time (budgeted hours) - 425 Processing time (total hours) - 400 Value-added processing time - 300 What is the process productivity in the Tray Production Department?
