Colonial Pharmaceuticals is a small firm specializing in new products. It is org

Question

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 below. 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 ROl and residual income. Ignore income taxes Allocated corp. overhead Cost of goods sold Divisional investment R&D; Sales SG&A; AC Division $ 680 3,360 10,600 2,800 11,200 SO Division 1,000 5,400 72,000 2,800 12,000 940 730 Required: a. Compute divisional income for the two divisions AC Division SO Division Divisional income

Explanation / Answer

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.

AC Division SO Division Divisional Investment 10600 72000 Sales 11200 12000 Less: Cost of Goods Sold 3360 5400 Gross Margin 7840 6600 Less:allocated corp overhead 680 1000 Less: SG&A 940 730 Less: R&D 2800 2800 a. Divisional Income for two division Operating Income 3420 2070 b. Operating Margin (Operating Income/Sale) % 30.54 17.25 c. ROI (Operating Income/Investment) % 32.26 2.88 d. Residual Income Operating Income-(Operating assets*cost of capital) 2360 -5130 3420-(10600*10%) 2070-(72000*10%)

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---