Nantucket Company has two divisions that report on a decentralized basis. Their results for 2018 were as follows: $\begin{array}{lrr}&\text { Helmet } &\text { Ball }\
\text {Sales }&\$ 150,000 & \$ 300,000 \
\text {Income }&\$ 15,000 & \$ 45,000 \
\text {Asset base }&\$ 75,000 & \$ 150,000 \
\text {Weighted average cost of capital }&12 \% & 12 \%
\end{array}$
Required:
Compute the following amounts for each division:
a.Return on investment (ROI).
b.Residual income if the desired rate of return is 20 percent.
c.EVA.
d.Turnover.
e.Margin for each division.

Question

Nantucket Company has two divisions that report on a decentralized basis. Their results for 2018 were as follows: $\begin{array}{lrr}&\text { Helmet } &\text { Ball }\
 \text {Sales }&\$ 150,000 & \$ 300,000 \
 \text {Income }&\$ 15,000 & \$ 45,000 \
 \text {Asset base }&\$ 75,000 & \$ 150,000 \
 \text {Weighted average cost of capital }&12 \% & 12 \%
\end{array}$ 
Required:
Compute the following amounts for each division: 
a.Return on investment (ROI).
b.Residual income if the desired rate of return is 20 percent.
c.EVA.
d.Turnover.
e.Margin for each division.

Quizplus · Accepted Answer

The Answer of Nantucket Company has two divisions that report on a decentralized basis. Their results for 2018 were as follows: $\begin{array}{lrr}&\text { Helmet } &\text { Ball }\
 \text {Sales }&\$ 150,000 & \$ 300,000 \
 \text {Income }&\$ 15,000 & \$ 45,000 \
 \text {Asset base }&\$ 75,000 & \$ 150,000 \
 \text {Weighted average cost of capital }&12 \% & 12 \%
\end{array}$ 
Required:
Compute the following amounts for each division: 
a.Return on investment (ROI).
b.Residual income if the desired rate of return is 20 percent.
c.EVA.
d.Turnover.
e.Margin for each division.

Nantucket Company Has Two Divisions That Report on a Decentralized