AutoSave Off H B e z - Week 7 Homework Assignment template - Compatibility Mode - Say File Home Insert Draw Page Layout Formulas Data Review Help Search View = = Arial v 10 General $ % Conditic Formata Cell Style IL Paste B 1 UHO Clipboard Font Alignment Number s K24 AB DI 1. Exercise 13-29 ROI; Residual Income 15 points Wyalusing Industries has manufactured prefabricated houses for over 20 years. The houses are constructed in sections to be assembled on customers' lots. Wyalusing expanded into the precut housing market when it acquired Fairmont Company, one of its suppliers. In this market, various types of lumber are precut into the appropriate lengths, banded into packages, and shipped to customers' lots for assembly. Wyalusing designated the Fairmont Division as an investment center. Wyalusing uses return on investment (ROI) as a performance measure with investment defined as average productive assets. Management bonuses are based in part on ROI. All investments are expected to earn a minimum return of 15 percent before income taxes. Fairmont's ROI! has ranged from 19.3 to 22.1 percent since it was acquired. Fairmont had an investment opportunity in 20x1 that had an estimated ROI of 18 percent. Fairmont's management decided against the investment because it believed the investment would decrease the division's overall ROI. The 20x1 income statement for Fairmont Division follows. The division's productive assets 2 were $12,600,000 at the end of 20x1, a 5 percent increase over the balance at the beginning of the year. VOOR AWN FAIRMONT DIVISION Income Statement For the Year Ended December 31, 20x1 (in thousands) 9 Sales revenue 10 Cost of goods sold 11 Gross margin 12 Operatina expenses: $24,000 15,800 $8,200 File Home llisell = Il General = Arial v 10 v $ % Conditional Formatting Format as Table Cell Styles Paste BI UBA lui 191 Number Styles Alignment Font Clipboard 5 K24 L M N O K J H I F G E A B C D FAIRMONT DIVISION Income Statement For the Year Ended December 31, 20x1 (in thousands) $24,000 9 Sales revenue 15,800 10 Cost of goods sold $8,200 11 Gross margin 12 Operating expenses: $2,140 13 Administrative 3,600 $5,740 14 Selling $2,460 15 Income from operations before income taxes 16 17 Required: 18 1.Calculate the following performance measures for 20x1 for the Fairmont Division. 19 a. Return on investment (ROI). 26 b.Residual income. ASSGMT 1 ASSGMT2 ASSGMT 3 ASSGMT 4 ASSGMT 5 Select destination and press ENTER or choose Paste 98% ga Type here to search TOV 1 K24 . : * for 4 10 Cost of goods sold 11 Gross margin 12 Operating expenses: 13 Administrative 14 Selling 15 Income from operations before income taxes F 15,800 $8,200 $2,140 3,600 $5,740 $2,460 16 17 Required: 18 1.Calculate the following performance measures for 20x1 for the Fairmont Division. 19 a. Return on investment (ROI). 21 23 24 25 26 b.Residual income. 27 28 29 ASSGMT 1 ASSGMT 2 ASSGMT 3 ASSGMT 4 ASSGMT 5 Select destination and press ENTER or choose Paste