Problem 14-44 (Algo) Comparing Business Units Using Economic Value Added (EVA) (LO 14-4)Colonial Pharmaceuticals is a small firm specializing in new products. It is organized into two divisions, which are based on theproducts they produce. AC Division is smaller and the life of the products it produces tend to be shorter than those produced by thelarger SO Division. Selected financial data for the past year is shown as follows. Divisional investment is as of the beginning of theyear. Colonial Pharmaceuticals uses a 8 percent cost of capital and uses beginning of the-year Investment when computing ROI andresidual income. Ignore income taxes.Allocated corp. overheadCost of goods soldDivisional investmentR&DAC Division$ 6153,2309,3002,1508,600so Division$ 1,6506,00078, 5003,60018, 5001,380SalesSGRA745R&D is assumed to have a two-year life in the AC Divisilon and a nine year life in the SO division. All R&D expenditures are spent at thebeginning of the year. Assume there are no current liabilities and (unrealistically) that no R&D Investments had taken place before thisуearRequired:a. Compute EVA for the two divisions. (Do not round intermediate calculations.)AC DivisionSO DivisionEconomic value added

Answer - Working note- 1. Calculation of NOPAT (net operating profit after tax) : Statement of…

Answered: Problem 14-44 (Algo) Comparing Business…

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter14: Decentralized Operations

Section: Chapter Questions

Problem 14.16E

See similar textbooks

Similar questions

Check my work Problem 14-44 (Algo) Comparing Business Units Using Economic Value Added (EVA) (LO 14-4) Colonial Pharmaceuticals is a small firm specializing in new products. It is organized into two divisions, which are based on the products they produce. AC Division is smaller and the life of the products it produces tend to be shorter than those produced by the larger SO Division. Selected financial data for the past year is shown as follows. Divisional investment is as of the beginning of the year. Colonial Pharmaceuticals uses a 8 percent cost of capital and uses beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes. AC Division sO Division Allocated corp. overhead Cost of goods sold 2$ 695 850 3,390 5,100 70,500 3,600 17,500 Divisional investment 10,900 2,950 11,800 R&D Sales SG&A 985 580 R&D is assumed to have a two-year life in the AC Division and a nine-year life in the SO division. All R&D expenditures are spent at the beginning of the…
Colonial Pharmaceuticals is a small firm specializing in new products. It is organized into two divisions, which are based on the products they produce. AC Division is smaller and the life of the products it produces tend to be shorter than those produced by the larger SO Division. Selected financial data for the past year is shown as follows. Divisional investment is as of the beginning of the year. Colonial Pharmaceuticals uses a 8 percent cost of capital and uses beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes. Allocated corp. overhead Cost of goods sold Divisional investment R&D Sales SG&A AC Division $ 670 3,340 10,400 2,700 10,800 910 SO Division $ 1,100 5,600 73,000 3,600 20,000 830
Colonial Pharmaceuticals is a small firm specializing in new products. It is organized into two divisions, which are based on the products they produce. AC Division is smaller and the life of the products it produces tend to be shorter than those produced by the larger SO Division. Selected financial data for the past year is shown as follows. Divisional investment is as of the beginning of the year. Colonial Pharmaceuticals uses a 8 percent cost of capital and uses beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes. AC Division so Division $ 1,050 Allocated corp. overhead Cost of goods sold Divisional investment $ 675 3,350 10,500 5,500 72,500 3,600 19,500 R&D 2,750 Sales 11,000 SG&A 925 780 R&D is assumed to have a two-year life in the AC Division and a nine-year life in the SO division. All R&D expenditures are spent at the beginning of the year. Assume there are no current liabilities and (unrealistically) that no R&D investments had taken…
Colonial Pharmaceuticals is a small firm specializing in new products. It is organized into two divisions, which are based on the products they produce. AC Division is smaller and the life of the products it produces tend to be shorter than those produced by the larger SO Division. Selected financial data for the past year is shown as follows. Divisional investment is as of the beginning of the year. Colonial Pharmaceuticals uses a 9 percent cost of capital and uses beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes. so Division $ 1,500 AC Division $ 630 Allocated corp. overhead Cost of goods sold 3,260 7,600 77,000 Divisional investment 9,600 R&D 4,200 1,875 9,200 Sales 20,600 SG&A 790 1,230 R&D is assumed to have a two-year life in the AC Division and a nine-year life in the SO division. All R&D expenditures are spent at the beginning of the year. Assume there are no current liabilities and (unrealistically) that no R&D investments had taken…
Colonial Pharmaceuticals is a small firm specializing in new products. It is organized into two divisions, which are based on the products they produce. AC Division is smaller and the life of the products it produces tend to be shorter than those produced by the larger SO Division. Selected financial data for the past year is shown as follows. Divisional Investment is as of the beginning of the year. Colonial Pharmaceuticals uses a 10 percent cost of capital and uses beginning-of-the-year Investment when computing ROI and residual income. Ignore Income taxes. Allocated corp. overhead Cost of goods sold Divisional investment R&D Sales SG&A AC Division $ 620 3,240 9,400 2,200 8,800 760 SO Division $ 1,600 6,600 78,000 3,400 18,000 1,330 Required: a. Compute divisional Income for the two divisions. b. Calculate the operating margin, which is equivalent to the return on sales, for the two divisions. c. Calculate ROI for the two divisions. d. Compute residual income for the two divisions.
$ Navarre Energy Research specializes in developing and commercializing new products. It is organized into two divisions, which are based on the products they produce. Canal Division is smaller, and the lives of the products it produces tend to be shorter than those produced by the larger Lake Division. Selected financial data for the past year are shown in the following table. Divisional investment is as of the beginning of the year. Navarre uses an 8 percent cost of capital and beginning-of-the-year Investment when computing ROI and residual income. Ignore Income taxes. Allocated corporate overhead Cost of goods sold Divisional investment R&D Sales Selling, general and administrative (excluding R&D) Economic value added Canal (5000) $4,185 20,170 61,800 12,850 53,400 4,755 Canal Division Division R&D is assumed to have a three-year life in Canal Division and an eight-year life in Lake Division. All R&D expenditures are spent at the beginning of the year. Assume there are no current…
Navarre Energy Research specializes in developing and commercializing new products. It is organized into two divisions, which are based on the products they produce. Canal Division is smaller, and the lives of the products it produces tend to be shorter than those produced by the larger Lake Division. Selected financial data for the past year are shown in the following table. Divisional investment is as of the beginning of the year. Navarre uses an 8 percent cost of capital and beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes. Division Canal ($000) Lake ($000) Allocated corporate overhead $ 4,100 $ 9,600 Cost of goods sold 20,000 30,000 Divisional investment 60,100 400,000 R&D 12,000 32,000 Sales 50,000 100,000 Selling, general and administrative (excluding R&D) 4,500 8,000 R&D is assumed to have a three-year life in Canal Division and an eight-year life in Lake Division. All R&D expenditures are spent…
! Required information [The following information applies to the questions displayed below.] ACME Food Manufacturing reports the following for two of its divisions for a recent year. ($ millions) Beverage Division Cheese Division Invested assets, beginning Invested assets, ending $2,675 2,599 2,687 $4,468 4,406 3,931 Sales Operating income 355 640 1. Compute return on investment. 2. Compute profit margin. 3. Compute investment turnover for the year. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute investment turnover for the year. (Enter your answers in millions.) Investment Turnover Choose Numerator: Choose Denominator: Investment Turnover %3D Investment Center Investment turnover %3D Beverage Cheese %3D
Navarre Energy Research specializes in developing and commercializing new products. It is organized into two divisions, which are based on the products they produce. Canal Division is smaller, and the lives of the products it produces tend to be shorter than those produced by the larger Lake Division. Selected financial data for the past year are shown in the following table. Divisional investment is as of the beginning of the year. Navarre uses an 8 percent cost of capital and beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes. Division Canal ($000) Lake ($000) Allocated corporate overhead $ 4,100 $ 9,600 Cost of goods sold 20,000 30,000 Divisional investment 60,100 400,000 R&D 12,000 32,000 Sales 50,000 100,000 Selling, general and administrative (excluding R&D) 4,500 8,000 Required: Compute divisional income for the two divisions. Calculate the operating margin, which is equivalent to the return on sales,…
Augustus Electrical Company has 2 divisions, one in Georgetown and one in Berbice Guyana and information on the both divisions are as follows: Georgetown Berbice Total assets $100,000 $500,000 Current liabilities 25,000 150,000 Revenue 50,000 50,000 Income before tax 20,000 75,000 Required: Calculate the return on investment (ROI) using net income and total assets as the measure of income and investment for the Berbice division. a.150% b.1.5% c.15% d.20%
What was the Paper Division's net operating income last year? The following information relates to last year's operations at the Paper Division of Germane Corporation: 15% Minimum required rate of return Return on investment (ROI) Sales Turnover (on operating assets) 18% P810,000 5 times P24,300 P29,160 P145,800 P162,000 Product differentiation is evident in the following cases EXCEPT The entity creates products that have features that are significantly of a high level compared to competitors. The entity continuously manufactures products in a pace that competitors cannot match. The entity provides superior customer service with the organization mindset of quick response. The entity sells products that are priced significantly lower compared to competitors.
Required Information [The following Information applies to the questions displayed below.] Megamart provides the following Information on its two Investment centers. Investment Center Electronics Sporting goods Sales $ 63,460,000 19,050,000 1. Compute return on Investment for each center. Using return on investment, which center is most efficient at using assets to generate Income? 2. Assume a target Income of 12% of average assets. Compute residual income for each center. Which center generated the most residual Income? 3. Assume the Electronics center is presented with a new Investment opportunity that will yield a 14% return on Investment. Should the new Investment opportunity be accepted? The target return is 12%. Complete this question by entering your answers in the tabs below. Numerator: Required 1 Required 2 Required 3 Compute return on investment for each center. Using return on investment, which center is most efficient at using assets to generate income? Income $ 3,173,000…

SEE MORE QUESTIONS

Recommended textbooks for you

Survey of Accounting (Accounting I)

Accounting

ISBN:

9781305961883

Author:

Carl Warren

Publisher:

Cengage Learning

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

Managerial Accounting

Accounting

ISBN:

9781337912020

Author:

Carl Warren, Ph.d. Cma William B. Tayler

Publisher:

South-Western College Pub

Survey of Accounting (Accounting I)

Accounting

ISBN:

9781305961883

Author:

Carl Warren

Publisher:

Cengage Learning

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

Managerial Accounting

Accounting

ISBN:

9781337912020

Author:

Carl Warren, Ph.d. Cma William B. Tayler

Publisher:

South-Western College Pub

Financial And Managerial Accounting

Accounting

ISBN:

9781337902663

Author:

WARREN, Carl S.

Publisher:

Cengage Learning,

SEE MORE TEXTBOOKS