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chapter_11

# 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)
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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