Vance Increquires All of Its Divisions to Maintain a Return on on Investment

question 111

Essay

Vance Inc.requires all of its divisions to maintain a return on investment (ROI)of at least 45 per cent.The manager of one of the divisions expects the division's net operating income to be $400 000 and its sales to be $2 000 000.
Required:
Calculate the division's required average operating assets in order to achieve the minimum ROI.

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Definitions:

Direct Materials Quantity Variance

A measure of the difference between the actual quantity of materials used in production and the standard expected quantity.

Direct Labor Time Variance

The difference between the actual time taken to manufacture a product and the standard time expected, multiplied by the wage rate.

Direct Labor Time Variance

The difference between the estimated time for production and the actual time taken, multiplied by the wage rate.

Direct Labor Rate Variance

The difference between the actual cost of direct labor and the standard cost, indicating efficiency in labor usage.