Wescott Company has three divisions: A, B, and C. The company has a hurdle rate of...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Wescott Company has three divisions: A, B, and C. The company has a hurdle rate of 8 percent. Selected operating data for the three divisions are as follows: Division C $ 1,052,000 Sales revenue Division A $ 1,290,000 797,000 71,000 55,000 Division B $1,053,000 773,000 59,000 Cost of goods sold Miscellaneous operating expenses 764,000 60,000 Interest and taxes 48,000 48,000 Average invested assets 9,511,000 2,259,000 3,716,000 Wescott is considering an expansion project in the upcoming year that will cost $5.7 million and return $521,000 per year. The project would be implemented by only one of the three divisions. Required: 1. Compute the ROI for each division. 2. Compute the residual income for each division. 3. Rank the divisions according to the ROI and residual income of each. 4-a. Compute the return on investment on the proposed expansion project. 4-b. Is this an acceptable project? 5. Without any additional calculations, state whether the proposed project would increase or decrease each division's ROI. 6. Compute the new ROI and residual income for each division if the project was implemented within that division. Wescott Company has three divisions: A, B, and C. The company has a hurdle rate of 8 percent. Selected operating data for the three divisions are as follows: Division C $ 1,052,000 Sales revenue Division A $ 1,290,000 797,000 71,000 55,000 Division B $1,053,000 773,000 59,000 Cost of goods sold Miscellaneous operating expenses 764,000 60,000 Interest and taxes 48,000 48,000 Average invested assets 9,511,000 2,259,000 3,716,000 Wescott is considering an expansion project in the upcoming year that will cost $5.7 million and return $521,000 per year. The project would be implemented by only one of the three divisions. Required: 1. Compute the ROI for each division. 2. Compute the residual income for each division. 3. Rank the divisions according to the ROI and residual income of each. 4-a. Compute the return on investment on the proposed expansion project. 4-b. Is this an acceptable project? 5. Without any additional calculations, state whether the proposed project would increase or decrease each division's ROI. 6. Compute the new ROI and residual income for each division if the project was implemented within that division.
Expert Answer:
Answer rating: 100% (QA)
1 ROI A B C Sales 1290000 1053000 1052000 Less COGS 797000 773000 764000 LEss Miscelleanous operatin... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-0078025518
2nd edition
Authors: Stacey Whitecotton, Robert Libby, Fred Phillips
Posted Date:
Students also viewed these accounting questions
-
Selected cost data for Antique Print, Co., are as follows: Estimated manufacturing overhead cost for the year . . . . . $ 115,000 Estimated direct labor cost for the year . . . . . . . . . . . . . ....
-
Selected cost data for Antique Poster Co. are as follows: Estimated manufacturing overhead cost for the year....$ 120,000 Estimated direct labor cost for the year......... 100,000 Actual...
-
Selected transactions for Sophie's Dog Care are as follows during the month of March. March 1 Paid monthly rent of $1,200. 3 Performed services for $140 on account. 5 Performed services for cash of...
-
Why is an investment portfolio containing a mix of stocks and bonds less risky than one containing a single asset class? Because the markets for stocks and bonds tend to move in the same direction at...
-
Prepare the necessary journal entries to record each of the following transactions of Dewey County College. 1. Tuition and fees charged for the fall 20X8 semester totaled $3,700,000; $100,000 of this...
-
Graph a possible density function representing crop yield (in kilograms) from a field under the given circumstance. A drought makes low yields most common, and there is no yield greater than 30 kg.
-
Proper recording within general ledger control accounts does not necessarily mean that transactions are posted accurately to individual vendor accounts. What controls can management institute to...
-
The controller of Norton Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs. Instructions (a) Determine the fixed- and...
-
A Michelson interferometer is used to measure the wavelength of light emitted from a monochromatic source. As the adjustable mirror is slowly moved through a distance DA = 0.0265 mm, an observer...
-
During the month of October 20--, The Pink Petal flower shop engaged in the following transactions: Oct. 1 Sold merchandise on account to Elizabeth Shoemaker, $1,000, plus tax of $50. Sale No. 222. 2...
-
How do civil cases differ from criminal cases. Give three examples.
-
An electric field of 460,000 N/C points due west at a certain spot. What is the magnitude of the force that acts on a charge of -3.00 \mu C at this spot? (1\mu C = 10-6 C) Give your answer in Sl unit...
-
Rinehart Corporation purchased from its stockholders 5,000 shares of its own previously issued stock for $240,000. It later resold 1,950 shares for $51 per share, then 1,950 more shares for $46 per...
-
1.S&A budget including cash disbursements for S&A Outdoor Chef Grill Company budgeted the following costs for anticipated production in October. The list below includes fixed MOH expenses and Fixed...
-
The function f(x) = 7x + 5 is one-to-one. Find an equation for f(x), the inverse function. ... fx)=0 (Type an expression for the inverse. Use integers or fractions for any numbers in the expression.)
-
A Mach-Zehnder interferometer is used as an optical intensity modulator. The two arms of the MZI have equal length L. In each arm we insert an electro-optic sample of length Ls, whose refractive...
-
Determine the optimal strategy for the situation by representing it as a game and finding the saddle point. State your final answer in the terms of the original question. A Republican and a...
-
What are the key dimensions of critical thinking 2. Watch the NBC Learn video on Diet Scams. What types of claims are made in this video Are they valid Elaborate on your responses. Discuss this video...
-
Match each of the following characteristics that describe financial accounting, managerial accounting, both financial and managerial accounting, or neither financial nor managerial accounting. 1. Is...
-
Refer back to the information given for E12-10, plus the following summarized income statement for Pizza International, Inc. (in millions): Revenues ...............$136,500 Cost of Sales...
-
Refer to the information in PA9-1 for Barley Hopp. Number of units produced and sold .... 110,000 Number of pounds of clay used ...... 178,200 Cost of clay ............. $ 267,300 Number of labor...
-
Entrepreneur magazine ranks franchises. Among the factors that the magazine uses in its rankings are growth rate, number of locations, start-up costs, and financial stability. A recent ranking listed...
-
The following 20 observations are for two quantitative variables, x and y. a. Create a scatter chart for these 20 observations. b. Fit a linear trendline to the 20 observations. What can you say...
-
The file colleges contains the following data for the sample of 102 private colleges: year founded, tuition and fees (not including room and board), and the percentage of undergraduates who obtained...
Study smarter with the SolutionInn App