Abdullah Khalifa H00152904

Subject Name: Subject Code: Student Name: ID Number: Submitted to:

Management Accounting ll, Individual Assignment 1 BMAC N350 Abdullah Khalifa Ghanem H00152904 Mr. Geoffrey Said

Abdullah Khalifa H00152904

PART A
KRISI PRODUCTS Last year's operating results for East Division Sales Variable Expenses Contribution Margin Fixed Expenses Net Operation Income Divisional Operating Assets Additional Information: Overall company ROI last year Investment needed for new product line $ 18% 3,000,000 $ $ $ 21,000,000 13,400,000 7,600,000 5,920,000 1,680,000 5,250,000

Revenue characteristics for new product Line: Sales Variable Expenses as a percent of sales Fixed Expenses $ $ 9,000,000 65% 2,520,000

The company had an over all ROI of 18% last year [Considering all divisions]. The company's East Division has an opportunity to add a new product line that would require an investment of $3,000,000. The cost and revenue characteristics of the new product line per year would be as follows: Sales Variable Expenses Fixed Expenses $ 9,000,000 65% of Sales 2,520,000

Abdullah Khalifa H00152904 Solution For Part A, for you're references check the assignment questions: Question 1 Answer: East Division's ROI for last year= East Division's ROI for last year= East Division's ROI for last year= ROI For The New Product Line: Before Sales Variable Expenses Contribution Margin Fixed Expenses Net Operation Income Divisional Operating Assets ROI for new product line ROI for new product line ROI for new product line $ $ $ $ $ $ 21,000,000 13,400,000 7,600,000 5,920,000 1,680,000 5,250,000 $ $ $ $ $ $ After 30,000,000 19,500,000 10,500,000 8,440,000 2,060,000 8,250,000 Net Operating Income Average Operating Assets $ 1,680,000 32% $ 5,250,000

= Net Operating Income Average Operating Assets = $ = 2,060,000 25% $ 8,250,000

Question 2 Answer: As the East Division manager I would reject the new product line; because the ROI went down from 32% to 25%, which means " Expenses will increase" that might be harming my evaluation, also the return on investments will decrease. Question 3 Answer: I assume that the only explanation to that question is even if it got rejected, but still the new product line is having a higher ROI than the company's ROI.

Question 4 Answer: Part A: East Division's ROI for last year= East Division's R.I for last year= East Division's R.I for last year= Net Operating Income - (Average Operating Assets x Minimum Required Rate of Return) $ $ 1,680,000 892,500 #2 $ 787,500

Abdullah Khalifa H00152904

Abdullah Khalifa H00152904

R.I for new product line R.I for new product line

= Net Operating Income - (Average Operating Assets x Minimum Required Rate of Return) = $ $ 2,060,000 1,237,500 822,500

R.I for new product line

= $

Part B: As the East Division manager I would accept the new production line, the reason for that is the ROI "Return on Investments" {21% (630,000 3,000,000) x 100%} is higher than the minimum required rate of return.

Abdullah Khalifa H00152904

#2

Abdullah Khalifa H00152904

Abdullah Khalifa H00152904

Abdullah Khalifa H00152904

Cash Inventory

Abdullah Khalifa H00152904

Abdullah Khalifa H00152904 BRIDGER, INC Balance Sheet Beginning Balance Assets Cash Accounts Receivable Inventory Plant and Equipment Investment in Brier Company Land (undeveloped) Total Assets Liabilities and Stockholders' Equity Accounts Payable Long-term Debt Stockholders' Equity Total liabilities and Stockholders' Equity $ $ $ $ BRIDGER, INC Income Statement Sales Operating Expenses Net Operating Income Interest and Taxes: Interest Expenses Tax Expenses Net Income Additional Information Dividends paid last year Minimum required Return $ 197,000 20% $ $ 120,000 200,000 $ $ 320,000 307,000 $ $ $ 4,180,000 3,553,000 627,000 380,000 1,000,000 1,150,000 2,530,000 $ $ $ $ 340,000 1,000,000 1,260,000 2,600,000 $ $ $ $ $ $ $ 125,000 340,000 570,000 845,000 400,000 250,000 2,530,000 $ $ $ $ $ $ $ 130,000 480,000 490,000 820,000 430,000 250,000 2,600,000 Ending Balance

The Company paid dividends of $197,000 last year. The "Investment in Brier Company" on the balance sheet represents an investment in the shares of another company.

Abdullah Khalifa H00152904

Abdullah Khalifa H00152904 Question 1 Answer: A) Margin = Margin = B) Turnover = 15% Sales Average Operating Assets BRIDGER, INC Balance Sheet Beginning Balance Assets Cash Accounts Receivable Inventory Plant and Equipment Total Operating Assets Average Operating Assets = $ B) Turnover= C) ROI for the last year= = 1,900,000 2.2 Margin x Turnover 33% $ $ $ $ 125,000 340,000 570,000 845,000 $ $ $ $ 130,000 480,000 490,000 820,000 Ending Balance Net Operating Income Sales

$ 1,880,000

$ 1,920,000

Question 2 Answer: R.I for the Net Operating Income - (Average Operating last year = Assets x Minimum Required Rate of Return) = $ R.I = $ 627,000 247,000 $ 380,000

Abdullah Khalifa H00152904