Solano Company has sales of $740,000, cost of goods sold of
$490,000, other operating expenses of $46,000, average invested
assets of $2,200,000, and a hurdle rate of 10 percent.
Required:
1. Determine Solano’s return on investment (ROI),
investment turnover, profit margin, and residual income.
2. Several possible changes that Solano could face
in the upcoming year follow. Determine each scenario’s impact on
Solano’s ROI and residual income. (Note: Treat each scenario
independently.)
a. Company sales and cost of goods sold increase
by 30 percent.
b. Operating expenses decrease by $10,000.
c. Operating expenses increase by 10
percent.
d. Average invested assets increase by
$420,000.
e. Solano changes its hurdle rate to 16
percent.
1.
sale |
740,000 |
Less: Cost of goods sold |
490,000 |
gross profit |
250,000 |
operating expense |
46000 |
net income |
204,000 |
ROI = net income /average operating assets = 204000/2,200,000 = 9.27%
Investment turnover = sales /Average operating assets = 740,000/2,200,000 = 0.34 times
Profit margin = net income /sales = 204000/7400000 = 27.6%
Residual income = net income - ( operating assets * hurdle rate) = 204,000 - (2200,000*10%) = -16000
2. a.
Sales |
962000 |
cost of goods sold |
637000 |
Gross profit |
325000 |
operating expense |
46000 |
Net income |
279000 |
ROI = 279000/2,20,000 =12.68%
Residual income = 279,000 - (2200,000*10%) = 59,000
b.
Cost of goods sold |
740,000 |
Cost of goods sold |
490,000 |
gross profit |
250,000 |
operating expense |
36,000 |
net income |
214,000 |
ROI = 214000/2,200,000 = 9.73%
Residual income = 214000 - 220000 = -6000
c.
gross profit |
250,000 |
operating expense |
41400 |
net income |
208,600 |
ROI = 208600/2,200,000 = 9.48%
Residual income =208600 - 220,000 = -11,400
d. ROI = 204000/2,620,000*100 = 7.79%
Residual loss = 204,000 - (2,620,000*10%) = -58,000
e. Residual loss = 204,000 - (2,200,000*16%) = -148,000
Solano Company has sales of $740,000, cost of goods sold of $490,000, other operating expenses of...
Solano Company has sales of $740,000, cost of goods sold of $490,000, other operating expenses of $46,000, average invested assets of $2,200,000, and a hurdle rate of 10 percent. Required: 1. Determine Solano’s return on investment (ROI), investment turnover, profit margin, and residual income. 2. Several possible changes that Solano could face in the upcoming year follow. Determine each scenario’s impact on Solano’s ROI and residual income. (Note: Treat each scenario independently.) a. Company sales and cost of goods sold...
please answer 2B and 2C
Solano Company has sales of $740,000, cost of goods sold of $490,000, other operating expenses of $46,000, average invested assets of $2,200,000, and a hurdle rate of 10 percent. Required: 1. Determine Solano's return on investment (ROI), investment turnover, profit margin, and residual income. 2. Several possible changes that Solano could face in the upcoming year follow. Determine each scenario's impact on Solano's ROI and residual income. (Note: Treat each scenario independently) a. Company sales...
Solano Company has sales of $760,000, cost of goods sold of $500,000, other operating expenses of $40,000, average invested assets of $2,250,000, and a hurdle rate of 11 percent. Required: 1. Determine Solano's return on investment (ROI), investment turnover, profit margin, and residual income. (Do not round your intermediate calculations. Enter your ROI and Profit Margin percentage answer to the nearest 2 decimal places, (i.e., 0.1234 should be entered as 12.34%). Round your Investment Turnover answer to 4 decimal places.)...
Solano Company has sales of $780,000, cost of goods sold of
$510,000, other operating expenses of $38,000, average invested
assets of $2,300,000, and a hurdle rate of 12 percent.
c. Operating expenses increase by 10 percent. Return on Investment Residual Income (Loss) d. Average invested assets increase by $440,000. Return on Investment Residual Income (Loss) 196.800) e. Solano changes its hurdle rate to 18 percent. Return on Investment 10.09% Residual Income (Loss)
Kaler Company has sales of $1,610,000, cost of goods sold of $835,000, other operating expenses of $248,000, average invested assets of $5,400,000, and a hurdle rate of 11 percent. Required: 1. Determine Kaler's return on investment (RON, investment turnover, profit margin, and residual income. 2. Several possible changes that Kaler could face in the upcoming vear follow. Determine each scenario's impact on Kalers Roland residual income. (Note: Treat each scenario independently.) a. Company sales and cost of goods sold increase...
8
please show all work as necessary
this is for part A, B, C, D, and E for this question.
Solano Company has sales of $740,000, cost of goods sold of $490,000, other operating expenses of $46,000, average invested assets of $2,200,000, and a hurdle rate of 10 percent. Required: 1. Determine Solano's return on investment (ROI), investment turnover, profit margin, and residual income. 2. Several possible changes that Solano could face in the upcoming year follow. Determine each scenario's...
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. (Note: Treat each scenario independently) a. Company sales and cost of goods sold...
Kaler Company has sales of $1,290,000, cost of goods sold of $755,000, other operating expenses of $168,000, average invested assets of $3,800,000, and a hurdle rate of 11 percent Required: 1. Determine Kaler's return on investment (ROI), investment turnover, profit margin, and residual income. (Do not round your intermediate calculations. Enter your ROI and Profit Margin answer to the nearest whole percentage, (i.e., 0.1234 should be entered as 12%). Round your Investment Turnover answers to 4 decimal places.) Return on...
Kaler Company has sales of $1,590,000, cost of goods sold of $830,000, other operating expenses of $243,000, average invested assets of $5,300,000, and a hurdle rate of 11 percent. Required: 1. Determine Kaler’s return on investment (ROI), investment turnover, profit margin, and residual income. (Do not round your intermediate calculations. Enter your ROI and Profit Margin answer to the nearest whole percentage, (i.e., 0.1234 should be entered as 12%). Round your Investment Turnover answers to 4 decimal places.) 2. Several...
req. 2b only
aler Company has sales of $1,210,000, cost of goods sold of $735,000, other operating expenses of $148,000, average investea ssets of $3,400,000, and a hurdle rate of 12 percent. Hequired: . 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. (Note: Treat each scenario independently.) . Company sales and cost...