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gisellerol gisellerol
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4 months ago
Tillamoke Company produces gourmet cheeses. Selected results from the most current year were as follows:

Sales revenue$3,500,000
Operating income 560,000
Average total assets5,000,000

Production manager, Melinda Penland, is investing the purchase of a new fermenting station that will increase the plant's production capacity. Based on her research, Melinda thinks the station would cost $140,000 and would increase sales revenue by $200,000 and operating profit by $32,000.

Required:

a.Calculate Tillamoke's current margin, asset turnover, and return on investment.
b.Calculate Tillamoke's margin, asset turnover, and return on investment assuming the
company purchases the new fermenting station.
c.Assume Melinda Penland's annual bonus is based on the company's return on
investment.
Will Melinda support the purchase of the new fermenting station? Why or why not?
Textbook 
Managerial Accounting

Managerial Accounting


Edition: 4th
Author:
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lucypierce86lucypierce86
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4 months ago
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More solutions for this book are available here
a.Margin = = 16%
Turnover =  = .7 times

ROI = 16% × .7 = 11.20%

b.Margin = = 16%
Turnover =  = .72 times

ROI = 16% × .72= 11.52%

c.Yes, Melinda will support the purchase of the fermenting station since the new
machine will increase her segment's ROI making it look as if she is performing well.
1

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gisellerol Author
wrote...

4 months ago
Thank you, thank you, thank you!
hmonier
wrote...

Yesterday
Good timing, thanks!
jbag1237
wrote...

2 hours ago
Smart ... Thanks!
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