Required:a. What is Measurement Division's ROI if it does not acquire the new machine?Note: Round your final answer to nearest whole percentage.b. What is Measurement Division's ROI this year if it does acquire the new machine?Note: Round your final answer to nearest whole percentage.c. If MD acquires the new machine and it operates according to specifications, what ROI is expected for next year?Note: Round your final answer to nearest whole percentage.a. ROIb. ROIc. ROI%%% Leidich 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.

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

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

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter9: Responsibility Accounting And Decentralization

Section: Chapter Questions

Problem 3PA: The income statement comparison for Forklift Material Handling shows the income statement for the...

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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
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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Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial information (in thousands of dollars) for the first year of business follows: Sales revenue Income Divisional assets (beginning of year) Current liabilities (beginning of year) R&D expendituresa aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming Lasky uses return on investment (ROI). a-2. Which division had the better performance? Req A1 Complete this question by entering your answers in the tabs below. Divisions Carolinas $ 2,100 170 1,000 290 1,050 Req A2 Carolinas Northeast Northeast $ 6,600 372 1,500 290 970 Evaluate the performance of the two divisions assuming Lasky uses return on investment (ROI). Note: Enter your answers as a percentage rounded to 1 decimal place (i.e., 32.1). ROI % %
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