For Year 1,Division C of Deerfield Company Reported Operating Assets

question 75

Essay

For Year 1,Division C of Deerfield Company reported operating assets of $8,800,000,revenues of $6,600,000,and operating expenses of $5,760,000.The company has established a target return on investment (ROI)of 10% for the division.
Required:
1)Calculate the Year 1 ROI for the division.Did the division achieve its target ROI for the year?
2)For Year 2,Division C managers expect that its operating assets will stay at about the same level as for Year 1.Variable expenses for Year 1 were $3,960,000,and the remaining expenses were fixed.The managers expect that the contribution margin ratio for Year 2 will be the same as for Year 1 and that the amount of fixed expenses will not change.To what level must sales increase in Year 2 to achieve the target ROI?

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Definitions:

Forgery

The act of fraudulently making or altering a document with the intent to deceive or harm others.

Passing Bad Checks

In criminal law, issuing or transferring a check or other negotiable instrument knowing it will be dishonored and with the intent to defraud.

Defrauding Creditors

The act of intentionally deceiving or hiding assets from creditors to avoid repayment of debts.

Falsified

Deliberately altered or misrepresented information to deceive or mislead.