Exam 10: Differential Analysis: the Key to Decision Making

Financial data for Redstone Company for last year appear below: The company paid dividends of $32,200 last year. The "Investment in Balsam Company" on the statement of financial position represents an investment in the stock of another company. Required: a. Compute the company's margin, turnover, and return on investment for last year. b. The Board of Directors of Redstone has set a minimum required return of 25%. What was the company's residual income last year?

Jolin Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below: The delivery cycle time was:

Ricric Corporation has provided the following data for one of its products: The delivery cycle time for this operation is:

Suppose a company evaluates divisional performance using both ROI and residual income. The company's minimum required rate of return for the purposes of residual income calculations is 12%. If a division has a residual income of $6,000, then its ROI is greater than 12%.

If operating income is $60,000, average operating assets are $240,000, and the minimum required rate of return is 20%, what is the residual income?

The Portland Division's operating data for the past two years is as follows: The Portland Division's margin in Year 2 was 150% of the margin for Year 1. The sales for Year 2 were:

Eacher Wares is a division of a major corporation. The following data are for the latest year of operations: Required: a. What is the division's margin? b. What is the division's turnover? c. What is the division's return on investment (ROI)? d. What is the division's residual income?

Move time is considered value-added time.

The North Division of the Lyman Company reported the following data for last year: The return on investment last year for the North Division was:

During the most recent month at Luinstra Corporation, queue time was 4.5 days, inspection time was 0.8 day, process time was 1.9 days, wait time was 5.1 days, and move time was 0.7 day. Required: a. Compute the throughput time. b. Compute the manufacturing cycle efficiency (MCE). c. What percentage of the production time is spent in non-value-added activities? d. Compute the delivery cycle time.

Mccubbin Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below: The delivery cycle time was:

Daab Products is a division of a major corporation. The following data are for the most recent year of operations: The division's turnover used to compute ROI is closest to:

CS Company has a profit margin of 11%. Sales are $320,000, net operating income is $35,200, and average operating assets are $128,000. What is the company's return on investment (ROI)?

Last year the Uptown Division of Gorcen Enterprises had sales of $300,000 and a net operating income of $24,000. The average operating assets at Uptown last year amounted to $120,000. Last year at Uptown the margin used to calculate ROI amounted to:

Ricric Corporation has provided the following data for one of its products: The throughput time for this operation is:

Pardun Corporation's management keeps track of the time it takes to process orders. During the most recent month, the following average times were recorded per order: Required: a. Compute the throughput time. b. Compute the manufacturing cycle efficiency (MCE). c. What percentage of the production time is spent in non-value-added activities? d. Compute the delivery cycle time.

Daab Products is a division of a major corporation. The following data are for the most recent year of operations: The division's margin used to compute ROI is closest to:

The West Division of Frede Corporation had average operating assets of $700,000 and net operating income of $120,800 in December. The minimum required rate of return for performance evaluation purposes is 16%. What was the West Division's residual income in December?

Which of the following performance measures will decrease if the minimum required rate of return increases?

Daab Products is a division of a major corporation. The following data are for the most recent year of operations: The division's return on investment (ROI) is closest to: