Kaler Company has sales of $1,210,000, cost of goods sold of $735,000, other operating expenses of $148,000,
Question:
Kaler Company has sales of $1,210,000, cost of goods sold of $735,000, other operating expenses of $148,000, average invested assets of $3,400,000, and a hurdle rate of 12 percent.
Required:
1. Determine Kaler’s return on investment (ROI), investment turnover, profit margin, and residual income.
2. Several possible changes that Kaler could face in the upcoming year follow. Determine each scenario’s impact on Kaler’s ROI and residual income.
a. Company sales and cost of goods sold increase by 15 percent.
b. Operating expenses increase by $73,000.
c. Operating expenses decrease by 10 percent.
d. Average invested assets decrease by $285,000.
e. Kaler changes its hurdle rate to 9 percent.
Step by Step Answer:
Managerial Accounting
ISBN: 978-0078025518
2nd edition
Authors: Stacey Whitecotton, Robert Libby, Fred Phillips