Straight Lines Pen & Ink Company produces ink pens. They produce tubular pens (400,000 a month)...

   

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Straight Lines Pen & Ink Company produces ink pens. They produce tubular pens (400,000 a month) and clicker pens (300,000 a month). One the next page are the balance sheets and income statements for the tube division, the clicker division, and the cartridge division. The cartridge division only produces that little thin clear tube filled with income and "sells" the cartridges to both the Tubular and Clicker divisions. Answer the following questions: 1. In calculating ROI, do you include cash, receivables, and inventory as assets? Why does or does this not make sense? Should we just keep it simple and use net income over the machinery assets? 2. What is the ROI for the Tubular Division? The Clicker Division? The Cartridge Division? The Entire Company? 3. Which division has a better margin? What division has a better turnover? What do these numbers mean? 4. Using the ROI information how would you evaluate the performance of each of the divisional managers? Tube Pens Sales Varble COGS Other COGS Total Cost of Goods Sold Gross (Contribution) Margin Sales & Administrative Fixed Costs NET INCOME Clicker Pens Sales Varble COGS Other COGS Total Cost of Goods Sold Gross (Contribution) Margin Sales & Administrative Fixed Costs NET INCOME Ink Cartridge Sales Varible COGS Other COGS Total Cost of Goods Sold Gross (Contribution) Margin Sales & Administrative Fixed Costs NET INCOME Assets Cash Accounts receivable Inventory Machinery Total Accounts Payable Stockholder's Equity Total S S S S $ per pen Straight-Line Pen & Ink Division Financial Statements 0.75 0.47 0.08 per pen 1.25 0.72 0.08 per pen 0.35 0.18 0.07 Total 60,000 $ 25,000 140,000 230,000 455,000 $ 160,000 $ 295,000 $ 455,000 $ #pens 400,000 400,000 400,000 #pens 300,000 300,000 300,000 #pens 700,000 700,000 700,000 Tubular 10,000 S 5,000 20,000 70,000 105,000 $ 30,000 $ 75,000 $ 105,000 $ 188,000 32,000 220,000 216,000 24,000 240,000 126,000 49,000 175,000 Absorption Contribution 300,000 (220,000) 80,000 (50,000) 30,000 375,000 (240,000) 135,000 (50,000) 245,000 85,000 (175,000) 70,000 (20,000) 50,000 Clicker 30,000 $ 20,000 50,000 120,000 220,000 $ 50,000 $ 170,000 $ 220,000 $ Cartridge 20,000 70,000 40,000 130,000 80,000 50,000 130,000 300,000 (188,000) 112,000 (50,000) (32,000) 30,000 375,000 (216,000) 159,000 (50,000) (24,000) 85,000 245,000 (126,000) 119,000 (20,000) (49,000) 50,000 Straight Lines Pen & Ink Company produces ink pens. They produce tubular pens (400,000 a month) and clicker pens (300,000 a month). One the next page are the balance sheets and income statements for the tube division, the clicker division, and the cartridge division. The cartridge division only produces that little thin clear tube filled with income and "sells" the cartridges to both the Tubular and Clicker divisions. Answer the following questions: 1. In calculating ROI, do you include cash, receivables, and inventory as assets? Why does or does this not make sense? Should we just keep it simple and use net income over the machinery assets? 2. What is the ROI for the Tubular Division? The Clicker Division? The Cartridge Division? The Entire Company? 3. Which division has a better margin? What division has a better turnover? What do these numbers mean? 4. Using the ROI information how would you evaluate the performance of each of the divisional managers? Tube Pens Sales Varble COGS Other COGS Total Cost of Goods Sold Gross (Contribution) Margin Sales & Administrative Fixed Costs NET INCOME Clicker Pens Sales Varble COGS Other COGS Total Cost of Goods Sold Gross (Contribution) Margin Sales & Administrative Fixed Costs NET INCOME Ink Cartridge Sales Varible COGS Other COGS Total Cost of Goods Sold Gross (Contribution) Margin Sales & Administrative Fixed Costs NET INCOME Assets Cash Accounts receivable Inventory Machinery Total Accounts Payable Stockholder's Equity Total S S S S $ per pen Straight-Line Pen & Ink Division Financial Statements 0.75 0.47 0.08 per pen 1.25 0.72 0.08 per pen 0.35 0.18 0.07 Total 60,000 $ 25,000 140,000 230,000 455,000 $ 160,000 $ 295,000 $ 455,000 $ #pens 400,000 400,000 400,000 #pens 300,000 300,000 300,000 #pens 700,000 700,000 700,000 Tubular 10,000 S 5,000 20,000 70,000 105,000 $ 30,000 $ 75,000 $ 105,000 $ 188,000 32,000 220,000 216,000 24,000 240,000 126,000 49,000 175,000 Absorption Contribution 300,000 (220,000) 80,000 (50,000) 30,000 375,000 (240,000) 135,000 (50,000) 245,000 85,000 (175,000) 70,000 (20,000) 50,000 Clicker 30,000 $ 20,000 50,000 120,000 220,000 $ 50,000 $ 170,000 $ 220,000 $ Cartridge 20,000 70,000 40,000 130,000 80,000 50,000 130,000 300,000 (188,000) 112,000 (50,000) (32,000) 30,000 375,000 (216,000) 159,000 (50,000) (24,000) 85,000 245,000 (126,000) 119,000 (20,000) (49,000) 50,000

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