Question

In the following list, assume each transaction is independent of the others. Each of these transactions occurs in a single division of Hopenstat Incorporated, a multidivision company. Each transaction may impact capital turnover, ROI, and/or residual income. For each transaction, explain how capital turnover, ROI, and/or residual income are affected (increase, decrease, or no effect).
a. During the month of January, management decided to discontinue a research and development project that was scheduled to run throughout the year. The project was not producing the hoped-for results that would lead to a new product.
b. Changes in the production process to a team-based approach during the latter half of the year decreased variable costs per unit of production without the need to purchase new equipment.
c. A large amount of obsolete inventory was written off in the month of April.
d. Newly purchased equipment in June increased the quality of the units produced but had no immediate effect on sales.
e. In August, corporate headquarters lowered the division's target rate of return from 15 percent to 12 percent because of the decreasing cost of debt.
f. The division hired a new chief financial officer to replace its retiring CFO. In order to receive some training for the new job, the newly hired CFO overlapped for six months with the retiring CFO.



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  • CreatedApril 17, 2014
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