Completely and thoroughly explain how a Proposed Income Statement and a Proposed Return on Investment (ROI) could be used to make a decision on whether or not to add a new product to the existing product line of a company that makes frozen food products.
Let us consider the following.
There is company called Org that has a new proposal to produce product A.
Here are the results from product A
Existing | A | Total | |
Sales | $ 80,000 | $ 45,000 | $1,25,000 |
COGS | $ 56,000 | $ 35,000 | $ 91,000 |
GP / Contribution | $ 24,000 | $ 10,000 | $ 34,000 |
Fixed Costs | $ 10,000 | $ 11,000 | $ 21,000 |
Net Income | $ 14,000 | $ -1,000 | $ 13,000 |
If these were the actual results, Product A would have been scrapped since the total company income has reduced.
This is how a Proposed Income Statement can help in making decision regarding addition of a new product.
Now suppose the total assets (investment) was $ 50,000. Another $ 15,000 were required for the new product.
Existing ROI = 14,000 / 50,000 = 28%
Proposed ROI = 13,000 / 65,000 = 20%
Using a Proposed Income Statement helps us to know the impact of the new product on the total income of the company. If the total income after considering the new product is less than the original income, then the new product must not be started. However, if the situation is other way around, that is, the total income is more with the addition of the new product, the product must be started.
Same is the case with ROI. ROI give us the rate at which income was generated. It tells us what portion of the investment was earned during a period. If the proposed ROI is higher with the new product, it must be started.
Completely and thoroughly explain how a Proposed Income Statement and a Proposed Return on Investment (ROI) could be use...
Completely and thoroughly explain how a Predetermined Time System, such as MTM or MOST, could be used to establish labor standards for a company that makes any type of metal products. Be specific in your answer and identify as many different specific examples as you can where a Predetermined Time System could be used to establish engineered standards for the different operations that are required to make any type of metal products
Completely and thoroughly explain how Control Charts could be used by a company that makes Eyeglass Lenses to improve the manufacturing processes they use to make eyeglass lenses.
Problem 11-18 Return on Investment (ROI) and Residual Income [LO11-1, LO11-2] “I know headquarters wants us to add that new product line,” said Dell Havasi, manager of Billings Company’s Office Products Division. “But I want to see the numbers before I make any move. Our division’s return on investment (ROI) has led the company for three years, and I don’t want any letdown.” Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis...
Problem 10-18 Return on Investment (ROI) and Residual Income [LO10-1, LO10-2] “I know headquarters wants us to add that new product line,” said Dell Havasi, manager of Billings Company’s Office Products Division. “But I want to see the numbers before I make any move. Our division’s return on investment (ROI) has led the company for three years, and I don’t want any letdown.” Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis...
Problem 10-18 Return on Investment (ROI) and Residual Income [LO10-1, LO10-2] “I know headquarters wants us to add that new product line,” said Dell Havasi, manager of Billings Company’s Office Products Division. “But I want to see the numbers before I make any move. Our division’s return on investment (ROI) has led the company for three years, and I don’t want any letdown.” Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis...
Completely and thoroughly explain how the concepts of Engineering Economy could be used to help a construction contracting company decide on whether they should invest in new equipment. You will need to include more information than what is presented in the lecture transcript for Engineering Economy.
Problem 11-18 Return on Investment (ROI) and Residual Income [LO11-1, LO11-2] "I know headquarters wants us to add that new product line," said Dell Havasi, manager of Billings Company's Office Products Division. "But I want to see the numbers before I make any move. Our division's return on investment (ROI) has led the company for three years, and I don't want any letdown." Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis...
Problem 9-18A Return on Investment (ROI) and Residual Income [LO9-1, LO9-2] “I know headquarters wants us to add that new product line,” said Dell Havasi, manager of Billings Company’s Office Products Division. “But I want to see the numbers before I make any move. Our division’s return on investment (ROI) has led the company for three years, and I don’t want any letdown.” Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis...
Problem 10-18 Return on Investment (ROI) and Residual Income [LO10-1, LO10-2] "I know headquarters wants us to add that new product line," said Dell Havasi, manager of Billings Company's Office Products Division But I want to see the numbers before l make any move. Our division's return on investment (ROl) has led the company for three years, and I don't want any letdown." Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis...
Problem 10-18 Return on Investment (ROI) and Residual Income (LO10-1, LO10-2] "I know headquarters wants us to add that new product line," said Dell Havasi, manager of Billings Company's Office Products Division. “But I want to see the numbers before I make any move. Our division's return on investment (ROI) has led the company for three years, and I don't want any letdown." Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis...