Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of capital of 15 percent. Selected financial information (in thousands of dollars) for the first year of business follows: East Weat Sales revenue $1,000 200 $5,000 390 3,000 200 Income Investment (beginning of year) Current liabilities (beginning of year) 2,000 200 RED expenditures 500 400 *R&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming BMI uses return on investment (ROI). ces Divisions ROI East West %6 a-2. Which division had the better performance? O East West

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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A-1. Evaluate the performance of the two divisions assuming BMI users return on investment (ROI). A-2. Which division had the better performance?
Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of capital of 15 percent. Selected financial information
(in thousands of dollars) for the first year of business follows:
East
West
Sales revenue
$1,000
200
$5,000
390
Income
Investment (beginning of year)
Current liabilities (beginning of year)
2,000
3,000
200
200
RED expenditures
50
400
R&D is assumed to benefit two periods. All R&D is spent at the beginning of the year.
Required:
a-1. Evaluate the performance of the two divisions assuming BMI uses return on investment (ROI).
ces
Divisions
ROI
East
West
a-2. Which division had the better performance?
O East
O West
Transcribed Image Text:Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of capital of 15 percent. Selected financial information (in thousands of dollars) for the first year of business follows: East West Sales revenue $1,000 200 $5,000 390 Income Investment (beginning of year) Current liabilities (beginning of year) 2,000 3,000 200 200 RED expenditures 50 400 R&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming BMI uses return on investment (ROI). ces Divisions ROI East West a-2. Which division had the better performance? O East O West
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