Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of capital of 15 percent. Selected financial information(in thousands of dollars) for the first year of business follows:EastWestSales revenue$1,0002002,000$5,000390IncomeInvestment (beginning of year)Current liabilities (beginning of year)3,000200200RAD expenditures500400R&D is assumed to benefit two periods. All R&D is spent at the beginning of the year.Required:a-1. Evaluate the performance of the two divisions assuming BMI uses residual income. (Enter answers in thousands of dollars.Negative amounts should be indicated by a minus sign.)ResidualIncomeDivisionsEastWest

Formula: Residual income = Income - ( cost of capital x Average operating Assets )

Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of capital of 15 percent. Selected financial Inform (in thousands of dollars) for the first year of business follows: East West Sales revenue Income Investment (beginning ot year) Current liabilities (beginning of year) $1,000 200 $5,000 390 2,000 200 3,000 200 RAD expenditures 500 400 R&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming BMI uses residual income. (Enter answers in thousands of dollars. Negative amounts should be indicated by a minus sign.) Divisions Residual Income Fast

Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of capital of 15 percent. Selected financial Inform (in thousands of dollars) for the first year of business follows: East West Sales revenue Income Investment (beginning ot year) Current liabilities (beginning of year) $1,000 200 $5,000 390 2,000 200 3,000 200 RAD expenditures 500 400 R&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming BMI uses residual income. (Enter answers in thousands of dollars. Negative amounts should be indicated by a minus sign.) Divisions Residual Income Fast

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of capital of 15 percent. Selected financial information (in thousands of dollars) for the first year of business follows: East West Sales revenue $ 1,000 $ 5,000 Income 200 390 Investment (beginning of year) 2,000 3,000 Current liabilities (beginning of year) 200 200 R&D expendituresa 500 400 aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming BMI uses return on investment (ROI).
Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial information (in thousands of dollars) for the first year of business follows: Sales revenue Income Divisional assets (beginning of year) Current liabilities (beginning of year) R&D expendituresa Carolinas $ 1,500 190 Northeast $ 5,400 1,000 230 372 1,500 230 750 670 aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming Lasky uses return on investment (ROI). a-2. Which division had the better performance? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Evaluate the performance of the two divisions assuming Lasky uses return on investment (ROI). Note: Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1).
Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial information (in thousands of dollars) for the first year of business follows: Sales revenue Income Divisional assets (beginning of year) Current liabilities (beginning of year) R&D expenditures a Carolinas $ 1,500 190 1,000 230 750 Northeast $ 5,400 372 1,500 230 670 aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming Lasky uses return on investment (ROI). a-2. Which division had the better performance? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Evaluate the performance of the two divisions assuming Lasky uses return on investment (ROI). Note: Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1). Divisions Carolinas Northeast ROI % %
Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of capital of 10 percent. Selected financial information (in thousands of dollars) for the first year of business follows: Sales revenue Income Investment (beginning of year) Current liabilities (beginning of year) R&D expendituresa Divisions aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming BMI uses return on investment (ROI). (Round your final answers to nearest whole percentage value.) East West ROI O East O West % % a-2. Which division had the better performance? East $2,100 750 3,100 310 1,050 acer
Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial information (in thousands of dollars) for the first year of business follows: Sales revenue Income Divisional assets (beginning of year) Current liabilities (beginning of year) R&D expenditures Carolinas $ 800 160 Northeast $ 4,000 312 1,000 1,500 160 160 400 320 R&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming Lasky Manufacturing uses economic value added (EVA). a-2. Which division had the better performance?
Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial information (in thousands of dollars) for the first year of business follows: Sales revenue Income Divisional assets (beginning of year) Current liabilities (beginning of year) R&D expendituresa aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming Lasky Manufacturing uses economic value added (EVA). a-2. Which division had the better performance? Complete this question by entering your answers in the tabs below. Req A1 Divisions Req A2 Carolinas Northeast Carolinas $ 1,100 190 1,000 190 550 Evaluate the performance of the two divisions assuming Lasky Manufacturing uses economic value added (EVA). Note: Note: Enter answers in thousands of dollars. Round your answers to 1 decimal place. EVA
Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial information (in thousands of dollars) for the first year of business follows: Sales revenue Income Divisional assets (beginning of year) Current liabilities (beginning of year) R&D expendituresa aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming Lasky uses return on investment (ROI). a-2. Which division had the better performance? Complete this question by entering your answers in the tabs below. Req A1 Divisions Carolinas $2,400 160 1,000 320 1,200 Req A2 Carolinas Northeast Evaluate the performance of the two divisions assuming Lasky uses return on investment (ROI). Note: Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1). Northeast $ 7,200 372 1,500 320 1,120 ROI % %
Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial information (in thousands of dollars) for the first year of business follows: Sales revenue Income Divisional assets (beginning of year) Current liabilities (beginning of year) R&D expendituresa aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming Lasky uses return on investment (ROI). a-2. Which division had the better performance? Req A1 Complete this question by entering your answers in the tabs below. Divisions Carolinas $ 2,100 170 1,000 290 1,050 Req A2 Carolinas Northeast Northeast $ 6,600 372 1,500 290 970 Evaluate the performance of the two divisions assuming Lasky uses return on investment (ROI). Note: Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1). ROI % %
Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial information (in thousands of dollars) for the first year of business follows: Sales revenue Income Divisional assets (beginning of year) Current liabilities (beginning of year) RAD expenditures Carolinas $1,600 160 1,000 240 800 Northeast $5,500 Complete this question by entering your answers in the tabs below. 432 1,500 240 720 R&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming Lasky Manufacturing uses economic value added (EVA). a-2. Which division had the better performance?
Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial information (in thousands of dollars) for the first year of business follows: Carolinas Northeast Sales revenue $ 900 $ 4,200 Income 170 372 Divisional assets (beginning of year) 1,000 1,500 Current liabilities (beginning of year) 170 170 R&D expendituresa 450 370 aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming Lasky Manufacturing uses economic value added (EVA). a-2. Which division had the better performance?
Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial information (in thousands of dollars) for the first year of business follows: Carolinas Northeast Sales revenue $ 900 $ 4,200 Income 170 372 Divisional assets (beginning of year) 1,000 1,500 Current liabilities (beginning of year) 170 170 R&D expendituresa 450 370 aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming Lasky Manufacturing uses residual income. a-2. Which division had the better performance?
Global Imex has two divisions; one located at Accra and the other in Takoradi.The following is an extract from the annual report for the 2010 financial year ACCRA TAKORADI Profit Before Depreciation 450,000 620,000 Depreciation 120,000 130,000 Non Current Assets 1,200,000 1,300,000 Current Assets 750,000 1,000,000 Current Liabilities 350,000 400,000 Cost of Capital is 20% Required (i) Using Return on Investment (ROI) and Residual Income, comment on the performance of the divisions.(ii) The Takoradi branch intends to sell one of the non-current assets with book value of GH¢120,000. This asset generates a profit of GH¢60,000. Accra also wants to acquire another asset costing GH¢90,000 that will generate a profit of GH¢40,000. To what extent will the decisions affect the performance of the divisions?