Curtis Company's Balance Sheet and Income Statement Are Provided Below

Essay

Curtis Company's balance sheet and income statement are provided below: $\begin{array}{c}\hline \text {Cutis Company}\\\hline \text {Balance Sheet}\\\hline \text {December 31,2014}\\\begin{array}{|l|l|} \hline \text { Assets } & \\\hline \text { Cash } & \$ 80,000 \\\hline \text { Accounts receivable } & 56,000 \\\hline \text { Inventory } & 30,000\\\hline \text { Plant and equipment} &440,000 \\\hline \text { Less accumulated depreciation } & \underline { 120,000 } \\\hline \text { Total assets } & \$ \underline { 486,000 } \\\hline & \\\hline \text { Liabilities and Stockholders' Equity } & \\\hline \text { Accounts payable } & \$ 24,000\\\hline \text { Notes payable } & 80,000\\\hline \text { Capital stock, no par } & 180,000\\\hline \text { Retained earuings } & \underline { 202,000 } \\\hline \text { Total habilities and stockholders' equity } & \$ \underline {486,000 }\\\hline\end{array}\end{array}$ Change date to Year 1 or current Year for 2014 on both statements.
CHANGE NEEDS TO BE MADE TO TABLE
Delete the ",2014" form the heading $\begin{array}{c}\hline {\text { Cutis Company }} \\\hline {\text { Income Statement }} \\\hline {\text { For the Year Ended December } 31,2014} \\\begin{array}{|l|lr|} \hline \text { Sales } & \$ & 480,000 \\\hline \text { Less variable costs: } & & \\\hline \text { Manufacturing } & & 120,000 \\\hline \text { Selling and administrative } & \$ & 110,000 \\\hline \text { Contribution margin } & & 250,000 \\\hline \text { Less fixed costs: } & & \\\hline {\text { Manufacturing }} & & 90,000 \\\hline \text { Selling and administrative } && 40,000 \\\hline \text { Net income } & \$&120,000 \\\hline\end{array}\end{array}$ The company pays its senior managers a bonus based on ROI.
Required:
1)Compute the company's ROI assuming that the amount of operating assets is measured at:
(a)cost;
(b)book value;and
(c)current replacement value,$700,000.
Round ROI to one decimal place (i.e.4.6%)
2)What is the lesson of this exercise?
CHANGE NEEDS TO BE MADE TO TABLE
Delete the ",2014" form the heading