Warren Company has two divisions with the following results: Sales revenue Ashland $ 447,000 $ 267,000 Erie $1,170,000 $ 847,000 Divisional expenses Segment income $ 180,000 $ 347,000 $3,970,000 Average invested assets $1,170,000 Warren Company has a hurdle rate of 11.7%. a. Calculate the return on investment for each division. (Round your answers to 2 decimal places.) Return on investment Ashland % Erie % b. Break each division's return on investment down into its component parts using the DuPont method. (Round your profit mar decimal places and investment turnover to 3 decimal places.) Investment Profit margin Turnover Ashland %

Warren Company has two divisions with the following results: Sales revenue Ashland $ 447,000 $ 267,000 Erie $1,170,000 $ 847,000 Divisional expenses Segment income $ 180,000 $ 347,000 $3,970,000 Average invested assets $1,170,000 Warren Company has a hurdle rate of 11.7%. a. Calculate the return on investment for each division. (Round your answers to 2 decimal places.) Return on investment Ashland % Erie % b. Break each division's return on investment down into its component parts using the DuPont method. (Round your profit mar decimal places and investment turnover to 3 decimal places.) Investment Profit margin Turnover Ashland %

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Gator, Inc. has three operating divisions and requires a 12% return on all investments. Selected information presented here: |Division A |Division B Division C $1,000,000 $120,000 $500,000 Revenues ? ? Operating Income Operating Assets Margin $100,000 ? $300,000 ? 12% ? Turnover 2 turns 1 turn ? ROI Residual Income ? ? $25,000 ? ? a. Calculate the missing amounts for each division. b. Comment on the relative performance of each division. c. Provide an example to show how residual income improves decision making at the divisional level.
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D1.
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Subject: accounting
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