C&C; Sports Continuing Case 10-32 Provided is the Exhibit 10-4 and segment margi
ID: 2581898 • Letter: C
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C&C; Sports Continuing Case 10-32 Provided is the Exhibit 10-4 and segment margin for Centex Yarns': Polyester Fibers Division $ 10,600,000 Rope Division $6,725,000 Nylon Fibers Division $8,650,000 Total $ 25,975,000 5,543,000 1,334,000 $ 3,723,000 2,368,000 649,000 $ 3,708,000 4,414,000 890,000 $ 3,346,000 12,325,000 2,873,000 $ 10,777,000 Revenue Less variable expenses: Cost of goods sold Selling & administrative Contribution margin Less traceable fixed expenses: Cost of goods sold Selling & administrative Segment margin Common fixed expenses Net operating income 1,685,000 236,000 $ 1,802,000 A = E = 1,382,000 174,000 $2,152,000 2,208,000 273,000 $ 865,000 5,275,000 683,000 $ 4,819,000 2,886,000 1,933,000 Polyester Fibers Division Segment Margin $ 1,802,000 Average Assets $8,153,000 Rope Division $2,152,000 $8,406,250 Nylon Fibers Division $ 865,000 $ 2,703,000 After seeing the results of the segment analysis for the Nylon Fibers division, James Cameron wants all three divisions focusing on the correct avenues for improving division performance.Explanation / Answer
1) segment margin ratio = segment's margin ÷ segment's revenue
*) polyster fibres Margin ratio =1802000÷10600000=.17 or 17%
*)Rope margin ratio =2152000÷6725000=.32 or 32%
*)Nylon fibres margin ratio =865000÷8650000=.10 or 10%
2) Asset turn over ratio = Revnue ÷ Average assets
*)polyester fibres asset turnover ratio = 10600000÷8153000=1.30 times
*)rope turnover ratio =6725000÷8406250=.80 times
*)Nylone fibres =8650000÷2703000=3.2 times
3) [normally we use " net income ÷ average assets " as formula for get return on investments. But here company does't specify how to allocate common cost to different segments. so here we use "segment margin" instead of "net income".]
Return on investment = segment margin ÷ segment's average assets
*)polyester fibres = 1802000÷8153000=.22 or 22%
*)rope return on investment =2152000÷8406250=.256 or 25.6%
*)nylone fibres return on investment =865000÷2703000=.32 or 32%
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