ZuoTi.Pro
Question

10) The current controllable margin for Stom Division is S124,000. Its current operating assets are $400,000. The division is considering purchasing equipment for $120,000 that will increase annual controllable margin by an estimated S20,000. If the equipment is purchased, what will happen to the return on investment for Stom Division? a. b. C. d. An increase of 16.1% A decrease of 13.3% A decrease of 3.3% A decrease of 7.2%

Just comparing

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1
Ans. Option c A decrease of 3.3%
*Calculation:
Decrease ROI = Current ROI - ROI after purchase of equipment
31% - 27.7%
3.3%
Current ROI =   Controllable margin / Current operating assets * 100
124000 / 400000 * 100
31%
ROI after purchase of equipment   =   Total controllable margin / Total operating assets * 100
144000 / 520000 * 100
27.7%
*Total controllable margin = 124000 + 20000
144000
*Total operating assets = 400000 + 120000
520000
0 0
Add a comment
Know the answer?
Add Answer to:
Just comparing 10) The current controllable margin for Stom Division is S124,000. Its current operating assets...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • The current controllable margin for Henry Division is $123000. Its current operating assets are $300000. The...

    The current controllable margin for Henry Division is $123000. Its current operating assets are $300000. The division is considering purchasing equipment for $90000 that will increase annual controllable margin by an estimated $5000. If the equipment is purchased, what will happen to the return on investment for Henry Division? An increase of 4.07% A decrease of 11.51% A decrease of 8.18% A decrease of 8.10%

  • Multiple Choice Question 132 Betsy Union is the Swifty Corporation manager and her performance is evaluated...

    Multiple Choice Question 132 Betsy Union is the Swifty Corporation manager and her performance is evaluated by executive management based on Division ROI. The current controllable margin for Swifty Corporation is 36000. Its current operating assets total $210000. The division is considering purchasing equipment for $40000 that will increase sales by an estimated $14000, with annual depreciation of $14000. If the equipment is purchased, what will happen to the return on investment for the division? O A decrease of 2.7%...

  • Bajalia Company compiled the following information for the year: Average operating assets Controllable margin $6,400,000 $...

    Bajalia Company compiled the following information for the year: Average operating assets Controllable margin $6,400,000 $ 800,000 Bajalia's corporate office expects the division to earn a minimum return of 10%. If Bajalia buys a new machine costing $120,000 that is expected to generate additional controllable margin of $12,000, what happens to ROI? O It will decrease to 12.45%. It will be 10%. O It will increase to 12.69%. O It will be 12.5%.

  • Sammy Company is considering eliminating its commercial division. The company allocates foed costs based on division...

    Sammy Company is considering eliminating its commercial division. The company allocates foed costs based on division sales. If the commercial division is dropped, $100,000 of the fixed costs allocated to it could be eliminated. The impact on Sammy's operating income from eliminating the commercial division would be Sales Variable costs Contribution margin Fixed costs Net income (loss) Garden $678,000 372,900 305,100 247,200 57,900 Farm $920,000 414,000 506,000 335,500 170,500 Commercial $ 692,000 649,800 42,200 252,400 (210,200) Ο Ο $10,200 decrease...

  • Effect of Proposals on Divisional Performance A condensed income statement for the Electronics Division of Gihbli...

    Effect of Proposals on Divisional Performance A condensed income statement for the Electronics Division of Gihbli Industries Inc. for the year ended December 31 is as follows: Sales $4,290,000 Cost of goods sold 2,771,500 Gross profit $ 1,518,500 Operating expenses $875,000 Income from operations. $ 643,500 Invested assets. $3,300,000 Assume that the Electronics Division received no charges from service departments. The president of Gihbli Industries Inc. has indicated that the division’s return on a $3,300,000 investment must be increased to...

  • Exercise 10-17 (Video) The South Division of Wiig Company reported the following data for the current...

    Exercise 10-17 (Video) The South Division of Wiig Company reported the following data for the current year. Sales Variable costs Controllable fixed costs Average operating assets $2,950,000 1,947,000 605,000 5,000,000 Top management is unhappy with the investment center's return on investment (ROI). It asks the manager of the South Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action 1. Increase sales by $300,000 with...

  • Exercise 10-17 (Video) The South Division of Wiig Company reported the following data for the current year Sales $3,000...

    Exercise 10-17 (Video) The South Division of Wiig Company reported the following data for the current year Sales $3,000,000 Variable costs 1,950,000 Controllable fixed costs 600,000 Average operating assets 5,000,000 Top management is unhappy with the investment center's return on investment (ROI). It asks the manager believes it is feasible to consider the following independent courses of action the South Division to submit plans to improve ROI in the next year. The manager 1. Increase sales by $300,000 with no...

  • The current profit for a subunit is $36,000. Its current invested capital is $200,000. The subunit...

    The current profit for a subunit is $36,000. Its current invested capital is $200,000. The subunit is considering purchasing for $20,000 equipment that will increase annual profit by an estimated $2,800. The firm's cost of capital is 12%. If the equipment is purchased, what will be the increase in residual income of the subunit? Select one: a. 4% b. $400 c. $16,000 d. $2,800 The current income for a subunit is $36,000 on sales revenues of $360,000. Its current invested...

  • Effect of Proposals on Divisional Performance A condensed income statement for the Electronics Division of Gihbli...

    Effect of Proposals on Divisional Performance A condensed income statement for the Electronics Division of Gihbli Industries Inc. for the year ended December 31, 20Y9, is as follows: Sales $3,360,000 Cost of goods sold 2,408,800 Gross profit $ 951,200 Operating expenses 548,000 Income from operations $ 403,200 Invested assets $2,800,000 Assume that the Electronics Division received no charges from service departments. The president of Gihbli Industries Inc. has indicated that the division’s return on a $2,800,000 investment must be increased...

  • Effect of proposals on divisional performance A condensed income statement for the Commercial Division of Maxell...

    Effect of proposals on divisional performance A condensed income statement for the Commercial Division of Maxell Manufacturing Inc. for the year ended December 31, 20Y9, is as follows: Sales $3,500,000 Cost of goods sold (2,480,000) Gross profit $1,020,000 Operating expenses (600,000) Operating income $420,000 Invested assets $2,500,000 Assume that the Commercial Division received no allocations from support departments. The president of Maxell Manufacturing has indicated that the division’s return on a $2,500,000 investment must be increased to at least 21%...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT