Exercise 12

# Exercise 12 - Exercise 12-1 Basic Segmented Income Statement[LO1 Royal Lawncare Company produces and sells two packaged products Weedban and

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Exercise 12-1 Basic Segmented Income Statement [LO1] Royal Lawncare Company produces and sells two packaged products, Weedban and Greengrow. Revenue and cost information relating to the products follow: Product Weedban Greengrow Selling price per unit \$ 8.00 \$ 35.00 Variable expenses per unit \$ 2.40 \$

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11.00 Traceable fixed expenses per year \$ 133,000 \$ 39,000 Common fixed expenses in the company total \$108,000 annually. Last year the company produced and sold 44,500 units of Weedban and 24,500 units of Greengrow. Required: Prepare a contribution format income statement for the year segmented by product lines. (Omit the "\$" sign in your response.) Total Weedban Greengrow Sales \$ 1,213,500 \$ 356,000 \$ 857,500 Variable expenses 376,300 106,800 269,500 Contribution margin 837,200
249,200 588,000 Traceable fixed expenses 172,000 133,000 39,000 Product line segment margin 665,200 \$ 116,200 \$ 549,000 Common fixed expenses not traceable to products 108,000 Net operating income \$ 557,200

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Feedback: Sales: Weedban: 44,500 units × \$8.00 per unit = \$356,000. Greengrow: 24,500 units × \$35.00 per unit = \$857,500. Variable expenses: Weedban: 44,500 units × \$2.40 per unit = \$106,800. Greengrow: 24,500 units × \$11.00 per unit = \$269,500. Exercise 12-2 Compute the Return on Investment (ROI) [LO2] Alyeska Services Company, a division of a major oil company, provides various services to the operators of the North Slope oil field in Alaska. Data concerning the most recent year appear below: Sales \$ 19,000,000 Net operating income \$ 4,700,000 Average operating assets \$ 36,600,000 Requirement 1: Compute the margin for Alyeska Services Company. (Round your answer to 2 decimal places, e.g., .1234 as 12.34. Omit the "%" sign in your response.)
Margin 24.74 % Requirement 2: Compute the turnover for Alyeska Services Company. (Round your answer to 2 decimal places, e.g., .1234 as .12.) Turnover 0.52 Feedback: Requirement 3: Compute the return on investment (ROI) for Alyeska Services Company. (Round your answer to 2 decimal places. Omit the "%" sign in your response.) ROI 12.86 with a tolerance of ±0.5 % Feedback:

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Exercise 12-3 Residual Income [LO3] Juniper Design Ltd. of Manchester, England, is a company specializing in providing design services to residential developers. Last year the company had net operating income of £490,000 on sales of £1,600,000. The company's average operating assets for the year were £1,800,000 and its minimum required rate of return was 11%. (The currency used in England is the pound, denoted by £.) Required: Compute the company's residual income for the year. (Omit the "£" sign in your response.) Residual income £ 292,000 Feedback: Average operating assets £ 1,800,000 Net operating income £ 490,000 Minimum required return: 11% × 1,800,000
198,000 Residual income £ 292,000 Exercise 12-5 Contrasting Return on Investment (ROI) and Residual Income [LO2 , LO3] Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and

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## This note was uploaded on 10/17/2010 for the course ACCT 1234 taught by Professor Duck during the Spring '10 term at A.T. Still University.

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Exercise 12 - Exercise 12-1 Basic Segmented Income Statement[LO1 Royal Lawncare Company produces and sells two packaged products Weedban and

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