Chapter 10 - Exercise 10-4(45 minutes 1 Margin = = Turnover...

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Exercise 10-4  (45 minutes) 1. Net operating income Margin =   Sales $16,000 =    =  2% $800,000 Sales Turnover =   Average operating assets $800,000 =    =  8 $100,000 ROI =  Margin ×  Turnover =  2% × 8 =  16% 2. Net operating income Margin =   Sales $16,000 +  $6,000 =     $800,000 +  $80,000 $22,000 =    =  2.5% $880,000 Sales Turnover =   Average operating assets $800,000 +  $80,000 =   $100,000 $880,000 =    =  8.8 $100,000 ROI =  Margin ×  Turnover =  2.5% ×  8.8 =  22%
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Exercise 10-4  (continued) 3. Net operating income Margin =   Sales $16,000 +  $3,200 =     $800,000 $19,200 =    =  2.4% $800,000 Sales Turnover =   Average operating assets $800,000 =    =  8 $100,000 ROI =  Margin ×  Turnover =  2.4% ×  8 =  19.2% 4. Net operating income Margin =     Sales $16,000 =    =  2% $800,000 Sales Turnover =   Average operating assets $800,000 =   $100,000 - $20,000 $800,000 =    =  10 $80,000 ROI =  Margin ×  Turnover =  2% × 10 = 20%
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Exercise 10-5  (45 minutes) 1. Computation of ROI. Division A:   $300,000 $6,000,000 ROI =   ×    = 5% ×  4 = 20% $6,000,000 $1,500,000 Division B:   $900,000 $10,000,000 ROI =   ×   = 9% × 2 = 18% $10,000,000 $5,000,000 Division C:   $180,000 $8,000,000 ROI =   ×   = 2.25% × 4 = 9% $8,000,000 $2,000,000 2. Division A Division B Division C Average operating assets. ... $1,500,000 $5,000,000 $2,000,000  Required rate of return. ........ ×                15%     ×                18%     ×                12%       Required operating income. . $        225,000     $        900,000     $        240,000       Actual operating income. .....
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This note was uploaded on 06/01/2008 for the course ACCT 606 taught by Professor Huh during the Spring '08 term at CSU San Bernardino.

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Chapter 10 - Exercise 10-4(45 minutes 1 Margin = = Turnover...

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