Required information [The following information applies to the questions displayed below.] Wyalusing Industries has manufactured prefabricated...
Fantastic news! We've Found the answer you've been seeking!
Question:
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/6648c34ce917f_6206648c34c5b1b7.jpg)
Transcribed Image Text:
Required information [The following information applies to the questions displayed below.] 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 14 percent before income taxes. Fairmont's ROI has ranged from 19.5 to 22.7 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 were $44,100,000 at the end of 201, a 5 percent increase over the balance at the beginning of the year. FAIRMONT DIVISION Income Statement For the Year Ended December 31, 20x1 (in thousands) Sales revenue Cost of goods sold Gross margin Operating expenses: $ 69,220 37,600 $ 31,620 Administrative Selling $ 4,880 18,130 Income from operations before income taxes 23,010 $ 8,610 Required: 1-a. Calculate the return on investment (ROI) for 20x1 for the Fairmont Division. 1-b. Calculate residual income for 20x1 for the Fairmont Division. Required information [The following information applies to the questions displayed below.] 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 14 percent before income taxes. Fairmont's ROI has ranged from 19.5 to 22.7 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 were $44,100,000 at the end of 201, a 5 percent increase over the balance at the beginning of the year. FAIRMONT DIVISION Income Statement For the Year Ended December 31, 20x1 (in thousands) Sales revenue Cost of goods sold Gross margin Operating expenses: $ 69,220 37,600 $ 31,620 Administrative Selling $ 4,880 18,130 Income from operations before income taxes 23,010 $ 8,610 Required: 1-a. Calculate the return on investment (ROI) for 20x1 for the Fairmont Division. 1-b. Calculate residual income for 20x1 for the Fairmont Division.
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
The drawing shows a frictionless incline and pulley. The two blocks are connected by a wire (mass per unit length = 0.0250 kg/m) and remain stationary. A transverse wave on the wire has a speed of...
-
Use the information in BE8-9 for CRC. Assume that the receivables are sold with recourse. Prepare the journal entry for CRC to record the sale, assuming that the recourse obligation has a fair value...
-
Show that when the optimal allocation is used, the variance of (2) str for two-phase sampling with stratification is given by (12.18).
-
The Longo Corporation issued \(\$ 50\) million maturity value of six percent coupon rate bonds, with interest paid semiannually. At the time of the bond issuance, equivalent risk-rated debt...
-
At December 31, 2015, certain accounts included in the property, plant, and equipment section of Townsand Companys balance sheet had the following balances: Land............ $ 100,000...
-
You are at a location that needs to be determined. You poke a one-meter long straight stick into the ground vertically. At a certain hour when you estimate that the solar declination is about 23.45 o...
-
Find the break-even point in units and dollars if the sale price per unit is $100, variable cost per unit is $40 and fixed cost is $6,000.
-
Find fg, f(x)= + 5+ + 1, g(x) = x + 1
-
An investor has the following assets: $ 1 2 , 0 0 0 in bonds with an expected return of 7 % . $ 1 5 , 0 0 0 in equities with an expected return of 1 5 % . $ 1 8 , 0 0 0 in real estate with an...
-
Georgio owns a 40 percent profits and capital interest in Rain Tree LLC. For the current year, Rain Tree had the following revenues, expenses, gains, and losses: Sales revenue $ 80,000 Gain on sale...
-
Graham Potato Company has projected sales of $14,400 in September, $17,000 in October, $24,400 in November, and $20,400 in December. Of the company's sales, 25 percent are paid for by cash and 75...
-
Thomas Piketty, the cover-boy economist, has had on the global debate over inequality. But a good one is to imagine a building uprooted from its foundation and moved, overnight, to the other side of...
-
Environmental scanning is associated with this type of tourism planning process? Select one: Oa. Scenario planning O b. Balanced Scorecard O c. Meet-analyze-report-approve process O d. Step-by-step...
-
Trade credit from suppliers is a very costly source of funds when discounts are lost. Explain why many firms rely on this source of funds to finance their temporary working capital.
-
Presented below are summary financial data from the Johnson & Johnson 2015 annual report. Using the ratio definitions from Exhibit 4.6, calculate the following ratios: return on equity, return on...
-
Presented below are summary financial data from the Bristol-Myers Squibb 2015 annual report. Using the ratio definitions from Exhibit 4.6, calculate the following liquidity and solvency ratios: cash...
-
Presented below are summary financial data from The Boeing Company 2015 annual report. Using the ratio definitions from Exhibit 4.6, calculate the following ratios: return on equity, return on assets...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App