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viktelen [127]
3 years ago
8

Calculating Average Operating Assets, Margin, Turnover, and Return on InvestmentEast Mullett Manufacturing earned operating inco

me last year as shown in the following income statement:Sales $531,250Cost of goods sold 280,000Gross margin $251,250Selling and administrative expense 194,000Operating income $57,250Less: Income taxes (@ 40%) 22,900 Net income $34,350At the beginning of the year, the value of operating assets was $390,000. At the end of the year, the value of operating assets was $460,000.Required:For East Mullett Manufacturing, calculate the following:1. Average operating assets $ 2. Margin (round to two decimal places) %3. Turnover (round to two decimal places) 4. Return on investment (round to one decimal place) %
Business
1 answer:
gladu [14]3 years ago
6 0

Answer:

1. $425,000

2. 10.78%

3. 1.25

4. 13.5%

Explanation:

The computations are shown below:

1. For Average Operating Assets

Average operating assets = (Beginning Operating Assets + Ending Operating Assets) ÷ 2

= ($390,000 + $460,000) ÷ 2

= $425,000

2. For margin

Margin = Operating Income ÷ Sales × 100

            = $57,250 ÷ $531,250 × 100

            = 10.78%

3. For turnover:

Turnover = Sales ÷ Average Operating Assets

               = $531,250 ÷ $425,000

               = 1.25

4. For Return on investment:

Return on investment  = Operating Income ÷ Average Operating Assets

                                       = $57,250 ÷ $425,000

                                       = 13.5%

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vichka [17]

Answer:

The answer is B.

Explanation:

FIFO inventory cost method will yield the highest taxable income during times of inflation or period of rising price.

FIFO is First in First out i.e the inventory that was purchase first will go out first. This method reflects the current market price because last inventories bought during inflation are part of the ending inventories. Ending inventories are high, cost of sales are low and gross profit is high.

Because gross profit is high, high tax will be charged

8 0
3 years ago
Hancock Inc. retains most of its earnings. The company currently has earnings per share of $11. Hancock expects its earnings to
monitta

Answer:

D1 = $3.50

D2 = $3.50

D3 = $3.50

Ke = 10% = 0.1

Po = <u>D1</u> +     <u>D2</u> +      <u>D3 </u>

      (1+ke)   (1+ke)2   (1+ke)3

Po = <u>$3.50</u> +   <u>$3.50</u>  + <u>$3.50 </u>

        (1+0.1)      (1+0.1)2  (1+0.1)3

Po = $3.18    +  $2.89  + $2.63

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None of the above

Explanation:

In this scenario, we need to discount the dividend in each year by the required at rate of return of 10%. The aggregate of the price obtained as a result of discounting in year 1 to year 3 gives the current market price.

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3 years ago
Binder Corporation agreed to build a warehouse for a client at an agreed contract price of $4,000,000. Expected (and actual) cos
Rainbow [258]

Answer:

The correct option is a. 2017: $200,000 2018: $520,000 2019: $240,000.

Explanation:

The formula for cost to cost method is expected or actual cost incurred to date divided by the total cost of the project or contract.

Therefore, we have:

Total cost = Cost in 2017 + Cost in 2018 + Cost in 2019 = $640,000 + $1,600,000 + $800,000 = $3,040,000

Cost in 2017 contribution to total cost = Cost in 2017 / Total cost = $640,000 / $3,040,000 = 0.21

Cost in 2018 contribution to total cost = Cost in 2018 / Total cost = $1,600,000 / $3,040,000 = 0.53

Cost in 2019 contribution to total cost = Cost in 2019 / Total cost = $800,000 / $3,040,000 = 0.26

Revenue in 2017 = Cost in 2017 contribution to total cost * Contract price = 0.21 * $4,000,000 = $840,000

Revenue in 2018 = Cost in 2018 contribution to total cost * Contract price = 0.53 * $4,000,000 = $2,120,000

Revenue in 2019 = Cost in 2019 contribution to total cost * Contract price = 0.26 * $4,000,000 = $1,040,000

Therefore, net income for each year 2017 through 2019 using the cost-to-cost method can be computed as follows:

Net income for year 2017 = Revenue in 2017 - Cost in 2017 = $840,000 - $640,000 = $200,000

Net income for year 2018 = Revenue in 2018 - Cost in 2018 = $2,120,000 - $1,600,000 = $520,000

Net income for year 2019 = Revenue in 2019 - Cost in 2019 = $1,040,000 - $800,000 = $240,000

Therefore, the correct option is a. 2017: $200,000 2018: $520,000 2019: $240,000.

6 0
3 years ago
Read 2 more answers
Which of the following is true?a. Anticipated inflation is an increase in the price level that comes as a surprise, at least to
alexira [117]

Answer:

Option "C" is the correct answer to the following statement.

Explanation:

Decision-makers are usually highly skilled in Forecasting Inflation, they educate themselves to get knowledge and skill which will help them to Anticipate inflation slow market rates.

Decision-makers probably expect with a particularly high level of certainty with these forecast many industries change their plans according to inflation.

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Genrish500 [490]

Answer:

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7 0
3 years ago
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