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Cost Accouting

In: Business and Management

Submitted By sharis989
Words 2495
Pages 10
.CHAPTER 10 Coolbrook Company has the following information available for the past year: | | River
Division | Stream
Division | Sales revenue | $ | 1,200,000 | $ | 1,800,000 | Cost of goods sold and operating expenses | | 900,000 | | 1,300,000 | | | | | | Net operating income | $ | 300,000 | $ | 500,000 | | | | | | Average invested assets | $ | 1,200,000 | $ | 1,800,000 | | The company’s hurdle rate is 6 percent. | |

Required: | 1. | Calculate return on investment (ROI) and residual income for each division for last year. (Do not round your intermediate calculations. Round "ROI" answers to 1 decimal place.) | River Division | Stream Division | ROI | +/-1%25.0 | % | +/-1%27.8 | % | Residual Income | $228,000 | | $392,000 | | | | | | | 2. | Recalculate ROI and residual income for each division for each independent situation that follows: | a. | Operating income increases by 10 percent. (Do not round your intermediate calculations. Round "ROI" answers to 2 decimal places.) | | | | | River Division | Stream Division | ROI | +/-1%27.50 | % | +/-1%30.56 | % | Residual Income | $258,000 | | $442,000 | | | b. | Operating income decreases by 10 percent. (Do not round your intermediate calculations. Round "ROI" answers to 1 decimal place.) | |
River Division | Stream Division | ROI | +/-1%22.5 | % | +/-1%25.0 | % | Residual Income | $198,000 | | $342,000 | | | | | c. | The company invests $250,000 in each division, an amount that generates $100,000 additional income per division. (Do not round your intermediate calculations. Round "ROI" answers to 2 decimal places.) | | | |
River Division | Stream Division | ROI | +/-1%27.59 | % | +/-1%29.27 | % | Residual...

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