121. Deutsch Products has the following data for its three divisions for the year:
Required:
a. Compute divisional operating income for each of the divisions. Assume taxes are 35%.
b. Calculate the profit margin ratio for each division.
c. Calculate the asset turnover for each division.
122. La Ceiba Stores has the following data for its two divisions for the year:
Required:
a. Compute divisional operating income for each of the divisions. Assume taxes are 35%.
b. Calculate the profit margin ratio for each division.
c. Calculate the asset turnover for each division.
123. Madrazo Corporation uses residual income to evaluate the performance of its divisions.
The minimum required rate of return for performance evaluation purposes is 19%. The Games
Division had average operating assets of $410,000 and net operating income of $86,000 in June.
Required:
What was the Games Division’s residual income in June?
124. The Casket Division of Rosencranz Corporation had average operating assets of $150,000
and net operating income of $27,800 in March. The company uses residual income to evaluate the
performance of its divisions, with a minimum required rate of return of 17%.
Required:
What was the Casket Division’s residual income in March?
125. Iles Industries is a division of a major corporation. The following data are for the latest
year of operations:
Required:
What is the division’s residual income?
126. Eckels Wares is a division of a major corporation. The following data are for the latest year
of operations:
Required:
a. What is the division’s margin?
b. What is the division’s turnover?
c. What is the division’s return on investment (ROI)?
d. What is the division’s residual income?
127. Ferris Wares is a division of a major corporation. The following data are for the latest year
of operations:
Required:
a. What is the division’s return on investment (ROI)?
b. What is the division’s residual income?
128. Gilde Industries is a division of a major corporation. Last year the division had total sales
of $23,380,000, net operating income of $2,828,980, and average operating assets of $7,000,000.
The company’s minimum required rate of return is 12%.
Required:
a. What is the division’s margin?
b. What is the division’s turnover?
c. What is the division’s return on investment (ROI)?
129. Heavey Fabrication is a division of a major corporation. Last year the division had total
sales of $21,120,000, net operating income of $2,006,400, and average operating assets of
$6,000,000. The company’s minimum required rate of return is 12%.
Required:
What is the division’s return on investment (ROI)?
130. Eber Wares is a division of a major corporation. The following data are for the latest year
of operations:
Required:
a. What is the division’s margin?
b. What is the division’s turnover?
c. What is the division’s return on investment (ROI)?
d. What is the division’s residual income?
131. Ferro Wares is a division of a major corporation. The following data are for the latest year
of operations:
Required:
a. What is the division’s return on investment (ROI)?
b. What is the division’s residual income?
132. Wryski Corporation had net operating income of $150,000 and average operating assets of
$500,000. The company requires a return on investment of 19%.
Required:
a. Calculate the company’s current return on investment and residual income.
b. The company is investigating an investment of $400,000 in a project that will generate annual
net operating income of $78,000. What is the return on investment of the project? What is the
residual income of the project? Should the company invest in this project?
133. Explain the difference between the gross margin ratio, the operating margin ratio, and the
profit margin ratio.
134. What are two disadvantages of using divisional income as a performance measure?
135. Describe the two main limitations of return on investment.
136. How does the use of residual income overcome the limitations of using return on
investment?
137. Explain how using gross book value to measure the assets gives different results than
using net book value. What happens to ROI over time under each of the two measures?
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138. Financial data for Windsor, Inc. for last year appear below:
The company paid dividends of $104,000 last year. The “Investment in Pine Company” on the
statement of financial position represents an investment in the stock of another company.
Required:
a. Compute the company’s margin, turnover, and return on investment for last year.
b. The Board of Directors of Windsor, Inc. has set a minimum required return of 25%. What was
the company’s residual income last year?
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139. Financial data for Beaker Company for last year appear below:
The company paid dividends of $2,100 last year. The “Investment in Cedar Company” on the
statement of financial position represents an investment in the stock of another company.
Required:
a. Compute the company’s margin, turnover, and return on investment for last year.
b. The Board of Directors of Beaker Company has set a minimum required return of 20%. What