None Problem 14-53 (Static) Evaluate Trade-Offs in Return Measurement (LO 14-2)Leldich Corporation manufactures hospital equipment. The Measurement Division (MD) manufactures testing and measurementequipment including a special cardiovascular Instrument. MD started the year with $6.25 million in other assets. At the beginning ofthe current year, MD Invested $7.5 million in automated equipment for Instrument assembly. The division's expected Income statementat the beginning of the year was as follows:Sales revenueOperating costsVariableFixed (all cash)DepreciationNew automated equipmentOtherDivision operating profit$ 24,000,0002,970,00011,600,0002,500,0001,650,000$ 5,280,000A sales representative from South Street Manufacturing (SSM) approached the manager of MD In late November. SSM is willing to sellfor $9.4 million a new assembly machine that offers significant Improvements over the automated equipment MD acquired at thebeginning of the year. The new equipment would expand division output by 12 percent while reducing cash fixed costs by $828,400. Itwould be depreciated for accounting purposes over a four-year life. Depreciation would be net of the $600,000 salvage value of thenew machine. The new equipment meets Leidich's cost of capital criterion. If MD purchases the new machine. It must be installed priorto the end of the year. For practical purposes, though, MD can ignore depreciation on the new machine because it will not go intooperation until the start of the next year.MD will have to dispose of the old machine because the new machine would be installed in the same area. The old machine has nosalvage value.Leidich has a performance evaluation and bonus plan based on ROI. The return Includes any losses on disposal of equipment.Investment is computed based on the end-of-year balance of assets, net book value. Ignore taxes.The manager is still assessing the problem of whether to acquire SSM's assembly machine. SSM tells the manager that the newmachine could be acquired next year, but it will cost 20 percent more. The salvage value would still be $600,000. Other costs orrevenue estimates would be apportioned on a month-by-month basis for the time each machine (elther the current machine or themachine the manager is considering) is in use. Fractions of months may be ignored. Ignore taxes.Required:Calculate ROI for the coming year assuming that the new equipment is bought at the beginning of the year.Note: Round your final answer to nearest whole percentage.ROI39 %

Leidich Corporation's Measurement Division (MD) is debating spending $9.4 million to acquire a…

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coming year assuming that the new equipmen Note: Round your final answer to nearest whole percentage. bought year.

Managerial Accounting: The Cornerstone of Business Decision-Making

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Chapter11: Performance Evaluation And Decentralization

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Leidich Corporation manufactures hospital equipment. The Measurement Division (MD) manufactures testing and measurement equipment including a special cardiovascular instrument. MD started the year with $6.25 million in other assets. At the beginning of the current year, MD invested $7.5 million in automated equipment for instrument assembly. The division's expected income statement at the beginning of the year was as follows: Sales revenue Operating costs Variable Fixed (all cash) Depreciation New automated equipment Other Division operating profit $ 24,000,000 2,970,000 11,600,000 2,500,000 1,650,000 $ 5,280,000 A sales representative from South Street Manufacturing (SSM) approached the manager of MD in late November. SSM is willing to sell for $9.4 million a new assembly machine that offers significant improvements over the automated equipment MD acquired at the beginning of the year. The new equipment would expand division output by 12 percent while reducing cash fixed costs by…
Leidich Corporation manufactures hospital equipment. The Measurement Division (MD) manufactures testing and measurement equipment including a special cardiovascular instrument. MD started the year with $6.25 million in other assets. At the beginning of the current year, MD invested $7.5 million in automated equipment for instrument assembly. The division’s expected income statement at the beginning of the year was as follows: Sales revenue $ 24,000,000 Operating costs Variable 2,970,000 Fixed (all cash) 11,600,000 Depreciation New automated equipment 2,500,000 Other 1,650,000 Division operating profit $ 5,280,000 A sales representative from South Street Manufacturing (SSM) approached the manager of MD in late November. SSM is willing to sell for $9.4 million a new assembly machine that offers significant improvements over the automated equipment MD acquired at the beginning of the year. The new equipment would expand division output by 12 percent while reducing cash fixed costs by…
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