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Required information [The following information applies to the questions displayed below.] Wyalusing Industries has manufactured prefabricated houses for over 20 years. The houses are constructed in sections to be assembled on customers' lots. Wyalusing expanded into the precut housing market when it acquired Fairmont Company, one of its suppliers. In this market, various types of lumber are precut into the appropriate lengths, banded into packages, and shipped to customers' lots for assembly. Wyalusing designated the Fairmont Division as an investment center. Wyalusing uses return on investment (ROI) as a performance measure, with investment defined as average productive assets. Management bonuses are based in part on ROI. All investments are expected to earn a minimum return of 14 percent before income taxes. Fairmont's ROI has ranged from 29.2 to 32.4 percent since it was acquired. Fairmont had an investment opportunity in 20x1 that had an estimated ROI of 28 percent. Fairmont's management decided against the investment because it believed the investment would decrease the division's overall ROI. The 20x1 income statement for Fairmont Division follows. The division's productive assets were $18,900,000 at the end of 20x1, a 5 percent increase over the balance at the beginning of the year. revenue Cost of goods sold Gross margin Operating expenses: Administrative Selling Income from operations before income taxes FAIRMONT DIVISION Income Statement For the Year Ended December 31, 20x1 (in thousands) Req 1A equired: a. Calculate the return on investment (ROI) for 20x1 for the Fairmont Division. b. Calculate residual income for 20x1 for the Fairmont Division. Complete this question by entering your answers in the tabs below. Req 1B $5,280 15,655 Return on investment Calculate the return on investment (ROI) for 20x1 for the Fairmont Division. % $ 41,600 $ 26,470 20,935 $ 5,535

Required information [The following information applies to the questions displayed below.] Wyalusing Industries has manufactured prefabricated houses for over 20 years. The houses are constructed in sections to be assembled on customers' lots. Wyalusing expanded into the precut housing market when it acquired Fairmont Company, one of its suppliers. In this market, various types of lumber are precut into the appropriate lengths, banded into packages, and shipped to customers' lots for assembly. Wyalusing designated the Fairmont Division as an investment center. Wyalusing uses return on investment (ROI) as a performance measure, with investment defined as average productive assets. Management bonuses are based in part on ROI. All investments are expected to earn a minimum return of 14 percent before income taxes. Fairmont's ROI has ranged from 29.2 to 32.4 percent since it was acquired. Fairmont had an investment opportunity in 20x1 that had an estimated ROI of 28 percent. Fairmont's management decided against the investment because it believed the investment would decrease the division's overall ROI. The 20x1 income statement for Fairmont Division follows. The division's productive assets were $18,900,000 at the end of 20x1, a 5 percent increase over the balance at the beginning of the year. revenue Cost of goods sold Gross margin Operating expenses: Administrative Selling Income from operations before income taxes FAIRMONT DIVISION Income Statement For the Year Ended December 31, 20x1 (in thousands) Req 1A equired: a. Calculate the return on investment (ROI) for 20x1 for the Fairmont Division. b. Calculate residual income for 20x1 for the Fairmont Division. Complete this question by entering your answers in the tabs below. Req 1B $5,280 15,655 Return on investment Calculate the return on investment (ROI) for 20x1 for the Fairmont Division. % $ 41,600 $ 26,470 20,935 $ 5,535

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
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Required information [The following information applies to the questions displayed below.] Wyalusing Industries has manufactured prefabricated houses for over 20 years. The houses are constructed in sections to be assembled on customers' lots. Wyalusing expanded into the precut housing market when it acquired Fairmont Company, one of its suppliers. In this market, various types of lumber are precut into the appropriate lengths, banded into packages, and shipped to customers' lots for assembly. Wyalusing designated the Fairmont Division as an investment center. Wyalusing uses return on investment (ROI) as a performance measure, with investment defined as average productive assets. Management bonuses are based in part on ROI. All investments are expected to earn a minimum return of 14 percent before income taxes. Fairmont's ROI has ranged from 29.2 to 32.4 percent since it was acquired. Fairmont had an investment opportunity in 20x1 that had an estimated ROI of 28 percent. Fairmont's management decided against the investment because it believed the investment would decrease the division's overall ROI. The 20x1 income statement for Fairmont Division follows. The division's productive assets were $18,900,000 at the end of 20x1, a 5 percent increase over the balance at the beginning of the year. Sales revenue Cost of goods sold Gross margin Operating expenses: Administrative Selling Income from operations before income taxes FAIRMONT DIVISION Income Statement For the Year Ended December 31, 20x1 (in thousands) Req 1A Required: 1-a. Calculate the return on investment (ROI) for 20x1 for the Fairmont Division. 1-b. Calculate residual income for 20x1 for the Fairmont Division. Complete this question by entering your answers in the tabs below. Req 1B $ 5,280 15,655 Return on investment Calculate the return on investment (ROI) for 20x1 for the Fairmont Division. % $ 68,070 41,600 $ 26,470 20,935 $ 5,535
Transcribed Image Text:Required information [The following information applies to the questions displayed below.] Wyalusing Industries has manufactured prefabricated houses for over 20 years. The houses are constructed in sections to be assembled on customers' lots. Wyalusing expanded into the precut housing market when it acquired Fairmont Company, one of its suppliers. In this market, various types of lumber are precut into the appropriate lengths, banded into packages, and shipped to customers' lots for assembly. Wyalusing designated the Fairmont Division as an investment center. Wyalusing uses return on investment (ROI) as a performance measure, with investment defined as average productive assets. Management bonuses are based in part on ROI. All investments are expected to earn a minimum return of 14 percent before income taxes. Fairmont's ROI has ranged from 29.2 to 32.4 percent since it was acquired. Fairmont had an investment opportunity in 20x1 that had an estimated ROI of 28 percent. Fairmont's management decided against the investment because it believed the investment would decrease the division's overall ROI. The 20x1 income statement for Fairmont Division follows. The division's productive assets were $18,900,000 at the end of 20x1, a 5 percent increase over the balance at the beginning of the year. Sales revenue Cost of goods sold Gross margin Operating expenses: Administrative Selling Income from operations before income taxes FAIRMONT DIVISION Income Statement For the Year Ended December 31, 20x1 (in thousands) Req 1A Required: 1-a. Calculate the return on investment (ROI) for 20x1 for the Fairmont Division. 1-b. Calculate residual income for 20x1 for the Fairmont Division. Complete this question by entering your answers in the tabs below. Req 1B $ 5,280 15,655 Return on investment Calculate the return on investment (ROI) for 20x1 for the Fairmont Division. % $ 68,070 41,600 $ 26,470 20,935 $ 5,535
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