1. Operating Average

Sales Income Assets ROI Margin Turnover

Case 1 $326,000 (a) $407,500 12% (b) (c)

Case 2 (d) $60,000 (e) (f) 12.5% .64

Calculate the missing numbers for each case independently. Each letter is worth 1 point.

2. Current data for two investment centers at North Pole Inc. are presented below.

Hermey Buddy

Sales $550,000 $925,000

Operating income $118,000 $152,000

Average assets $690,000 $1,250,000

Santa Claus has developed a new toy that he would like to begin producing. The budget for the new toy reflects sales of $320,000; total expenses of $281,000; and required average assets of $280,000. Which of the following is true if Santa sets the minimum rate of return at 13%? 4 points
Neither Hermey nor Buddy will want the new toy if they are evaluated using return on investment.
Neither Hermey nor Buddy will want the new toy if they are evaluated using residual income.
Hermey would want the new toy but Buddy would not if they are evaluated using return on investment.
Both Hermey and Buddy would want the new toy if they are evaluated using residual income.