Questions -
1. Basic Segmented Income Statement
Royal Lawncare Company produces and sells two packaged products, Weedban and Greengrow. Revenue and cost information relating to the products follow:
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Product
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Weedban
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Greengrow
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Selling price per unit
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$ 6.00
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$ 7.50
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Variable expenses per unit
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$ 2.40
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$ 5.25
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Traceable fixed expenses per year
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$45,000
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$21,000
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Common fixed expenses in the company total $33,000 annually. Last year the company produced and sold 15,000 units of Weedban and 28,000 units of Greengrow.
Required: Prepare a contribution format income statement segmented by product lines.
2. Compute the Return on Investment
Alyeska Services Company, a division of a major oil company, provides various services to the operators of the North Slope oil field in Alaska. Data concerning the most recent year appear below:
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Sales
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$7,500,000
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Net operating income
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$600,000
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Average operating assets
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$5,000,000
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Requirement 1: Compute the margin for Alyeska Services Company.
Requirement 2: Compute the turnover for Alyeska Services Company.
Requirement 3: Compute the return on investment (ROI) for Alyeska Services Company.
3. Residual Income
Juniper Design Ltd. of Manchester, England, is a company specializing in providing design services to residential developers. Last year the company had net operating income of £600,000 on sales of £3,000,000. The company's average operating assets for the year were £2,800,000 and its minimum required rate of return was 18%. (The currency used in England is the pound, denoted by £.)
Required: Compute the company's residual income for the year.