nature, have to be in stock at your dealers if they are to be sold (customers are not willing to wait). The director of marketing proposes that you increase inventories by 25 percent (a major investment to you). She has also given the information in the following table. Use Figure 2.3. Category Sales Cost of goods sold Variable expenses Fixed expenses Inventory Accounts receivable Current Values Proposed Impact of Inventory Increase 25% (improvement) $ 2,000,000 $ 1,500,000 08 $ 300,000 10% reduction $ 100,000 15% (increase) $ 300,000 25% + $ 100,000 0% Other current assets $ Fixed assets $ 500,000 400,000 0% 0% a. Using the information given, complete the following table and calculate the ROA for current values and new values. (Round "ROA" to 2 decimal places.) Category Current Values New Values Sales $ 2,000,000 $ 2,000,258 Cost of goods sold $ 1,500,000 Variable expenses $ 300,000 $ 299,892 Fixed expenses $ 100,000 $ 100,158 Inventory $ 300,000 $ 300,258 Accounts receivable $ 100,000 $ 100,008 Other current assets $ 500,000 Fixed assets $ 400,000 ROA % %
nature, have to be in stock at your dealers if they are to be sold (customers are not willing to wait). The director of marketing proposes that you increase inventories by 25 percent (a major investment to you). She has also given the information in the following table. Use Figure 2.3. Category Sales Cost of goods sold Variable expenses Fixed expenses Inventory Accounts receivable Current Values Proposed Impact of Inventory Increase 25% (improvement) $ 2,000,000 $ 1,500,000 08 $ 300,000 10% reduction $ 100,000 15% (increase) $ 300,000 25% + $ 100,000 0% Other current assets $ Fixed assets $ 500,000 400,000 0% 0% a. Using the information given, complete the following table and calculate the ROA for current values and new values. (Round "ROA" to 2 decimal places.) Category Current Values New Values Sales $ 2,000,000 $ 2,000,258 Cost of goods sold $ 1,500,000 Variable expenses $ 300,000 $ 299,892 Fixed expenses $ 100,000 $ 100,158 Inventory $ 300,000 $ 300,258 Accounts receivable $ 100,000 $ 100,008 Other current assets $ 500,000 Fixed assets $ 400,000 ROA % %
Chapter9: Responsibility Accounting And Decentralization
Section: Chapter Questions
Problem 1PB: Use the following information to answer the questions that follow. A. Calculate the operating income...
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