Assume the Cell Phone Division of the First Electronics Corporation

question 13

Multiple Choice

Assume the Cell Phone Division of the First Electronics Corporation had the following results last year (in thousands) .Management's target rate of return is 10% and the weighted average cost of capital is 7%.Its effective tax rate is 30%. $$\begin{array} { | l | r | } \hline \text { Sales } & \$ 6,000,000 \\\hline \text { Operating income } & 900,000 \\\hline \text { Total assets } & 3,000,000 \\\hline \text { Current liabilities } & 750,000 \\\hline\end{array}$$
- What is the division's capital turnover?

• A)2.0
• B)3.3
• C)4.0
• D)6.7

Understand the advantages of using return on investment (ROI) and residual income as performance measures.

Learn about the components of return on investment (ROI) and how they provide a comprehensive view of divisional performance.

Analyze the calculation and significance of investment turnover in evaluating performance.

Understand the purpose and method of allocating indirect operating expenses to departments.

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Definitions:

Weekly Salary

Weekly salary refers to the amount of money an individual earns per week for their labor or services.

Commission

Remuneration for sales or service personnel, calculated as a fixed percentage of the sales they accomplish.

Bonus

An extra payment made to an employee beyond their normal salary, often reflecting their performance or company success.

Gross Cost

The total cost incurred before any deductions, such as discounts or rebates, are applied, representing the full price of a product or service.