Prepare a return on investment analysis for regional manager

Assignment Help Accounting Basics
Reference no: EM13150048

prepare a return on investment analysis for the regional manager of Out-and-In Burgers. This growing chain is trying to decide which outlet of two alternatives to open. The first location (A) requires a $500,000 investment and is expected to yield annual net income of $70,000. The second location (B) requires a $200,000 investment and is expected to yield annual net income of $38,000.

Compute the return on investment for each Out-and-In Burgers alternative. (Omit the "%" sign in your response.)

Location Return on
Investment
Location A % 
Location B % 

Comart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center).

Investment Center Sales Net
Income Average
Invested Assets
Electronics $ 11,100,000 $ 688,500 $ 4,050,000
Sporting goods 7,900,000 880,000 5,500,000

(1.1)
Compute return on investment for each department. (Do not round your intermediate calculations and round your final answers to the nearest whole percentages. Omit the "%" sign in your response.)

Return on Investment
Electronics % 
Sporting goods % 

(1.2)
Using return on investment, which department is most efficient at using assets to generate returns for the company?

Electronics
Sporting goods

(2.1)
Assume a target income level of 12.7% of average invested assets. Compute residual income for each department. (Omit the "$" sign in your response.)

Electronics Sporting goods
Residual income $ mce_markernbsp;

(2.2) Which department generated the most residual income for the company?

Sporting goods
Electronics

(3)
Assume that the Electronics department is presented with a new investment opportunity that will yield a 14.8% return on assets. (Assume a target income level of 12.7% of average invested assets.) Should the new investment opportunity be accepted?

Reject
Accept

L'Oreal reports the following for a recent year for the major divisions in its Cosmetics branch.

(€ millions) Sales Income Total Assets
End of Year
Total Assets
Beginning of Year
Professional products € 2,572 € 509 € 2,316 € 2,240
Consumer products 8,375 1,558 5,296 5,161
Luxury products 4,190 746 3,859 2,495
Active cosmetics 1,309 269 617 618





Total € 16,446 € 3,082 € 12,088 € 10,514






1.1
Compute profit margin for each division. (Round your answers to 2 decimal places. Omit the "%" sign in your response.)

Investment Center Profit margin
Professional products % 
Consumer products % 
Luxury products % 
Active cosmetics % 

1.2
Which L'Oreal division has the highest profit margin?


Active cosmetics
Consumer products
Professional products
Luxury products

2.1
Compute investment turnover for each division. (Do not round intermediate calculations and round your final answers to 2 decimal places.)

Investment Center Investment turnover
Professional products
Consumer products
Luxury products
Active cosmetics

2.2
Which L'Oreal division has the best investment turnover?


Luxury products
Active cosmetics
Professional products
Consumer products 

Reference no: EM13150048

Questions Cloud

Third quarter financial statements : On September 30 a company needed to estimate its ending inventory to prepare its third quarter financial statements. The following information is available:
What types of strategic alternatives might such organization : Imagine a nonprofit organization trying to raise funds for cancer research. What types of strategic alternatives might such an organization develop?
Presently the theater advertises 125 times per week : where P represents price and A is the number of weekly advertisements. Presently the theater advertises 125 times per week. Assuming this is the only theater in town, and its marginal cost, MC, is equal to zero,
Why is it often difficult to develop a realistic analysis : Why is it often difficult to develop a realistic analysis?
Prepare a return on investment analysis for regional manager : prepare a return on investment analysis for the regional manager of Out-and-In Burgers. This growing chain is trying to decide which outlet of two alternatives to open. The first location (A) requires a $500,000 investment and is expected to yield an..
Find equivalent act score if sat score is given : Assume that the two tests use different scales to measure the same aptitude. If a woman gets a SAT score of 1220, find her equivalent ACT score.
How can on protein kinase control : In yeast, there is a single CDK that catalyzes both the G1/S and G2/M transitions. How can on protein kinase control these two very different cell cycle transitions?
Basics of absorption costing net operating income : Determine each year's absorption costing net operating income. Present your answer in the form of a reconciliation report.
Dynamic technology : Here is a "dynamic technology" question - When it comes to automobile production it is an accepted fact that American automakers did not readily adopt and use Asian and European technologies in the production of cars. The result was a loss of global ..

Reviews

Write a Review

 

Accounting Basics Questions & Answers

  Cash flows from operating-investing and financing activities

The following information is available from Gray Co.'s accounting records for the year ended December 31, 2010 (amounts in million):

  Budgeted total industry sales

Paquindo Co. has two products: X and Y. The firm had the following budget and operating results for the period just ended. The budgeted total industry sales for both products was 324,800 units and the actual industry sales was 350,000.

  Computing total dollar return and rate of return

If Michelle purchased 100 shares of Home Depot common stock at the beginning of January for $25. She received a $1.25 dividend payment from the company at the end of December. At that time, the stock was selling for $27.50 per share. What is the d..

  Journal entries to record issuance of stock options

Prepare journal entries to record issuance of the stock options, termination of stock options, exercise of the stock option and the charges compensation expense for year ending 12/31/2010, 12/31/2011, 12/31/2012"

  Total budgeted manufacturing overhead

The total budgeted manufacturing overhead for the year was $2,000,000, of which $1,600,000 was variable and $400,000 was fixed.

  What methods are used to allocate the cost

John recently came into a sum of money from an inheritance and is contemplating purchasing a small manufacturing facility in his home town. Not knowing much about running a business, he decided to have lunch with some of the other businesspeople i..

  Effect of the intra-entity sale

Senior sold all of these goods in 2011. How should Perez report the effect of the intra-entity sale on its 2011 income statement?

  How many partners can a partnership have

why are the assets contributed by each partner recorded at their fair market values?

  Journal entry for issuance of bonds

Prepare the journal entry to record the issuance of the bonds and the related bond issue costs incurred on January 1, 2009.

  Integral part of the annual period

Some accountants hold the view that each interim period should stand alone as a basic accounting period, whereas others view each interim period as essentially an integral part of the annual period. Distinguish between these views.

  Determining project simple-regular payback

The project will generate positive cash flows of $85,000 a year at the end of each of the next five years. The project's NPV is $100,000 and the company's WACC is 10 percent. What is the project's simple, regular payback?

  What is the dollar value of the ending inventory

A company manufactures a single product. During year 2012, a total of 20,000 units of this product were produced and 15,000 units were sold. The sales price was $20.00 per unit.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd