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chapter_11 - Exercise112(10minutes 1 Margin= = 2...

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Exercise 11-2  (10 minutes) 1. Net operating income Margin =   Sales $5,400,000 =    =  30% $18,000,000 2. Sales Turnover =   Average operating assets $18,000,000 =    = 0.5 $36,000,000 3. ROI =  Margin  ×  Turnover =  30%  ×  0.5 =  15%
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Exercise 11-8  (30 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 ...... $  300,000 $  900,000 $  180,000 Required operating income  (above) ..............................       225,000           900,000             240,000     Residual income .................. $          75,000     $                          0    $          (60,000)    
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Exercise 11-8
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  • Summer '10
  • SUE
  • $36,000,000, $ 0       240,000, $1,900,000 2, $627,000    380,000, $  180,000      900,000, $  300,000      225,000

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