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Exercise 9-5: Two segments (Mountain Bike and Road Bike) showed the following data for the...

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Accounting

Exercise 9-5: Two segments (Mountain Bike and Road Bike) showed the following data for the most recent year:

Mountain Bike Road Bike

Contribution to indirect expenses $ 840,000 $ 504,000 Assets directly used by and identified with the segment $2,520,000 $2,184,000 Sales $3,360,000 $ 6,720,000

  1. Calculate return on investment for each segment in the most direct manner.

  2. Calculate return on investment using the margin and turnover components.

Exercise 9-6: Calculate the new margin, turnover, and return on investment of the Mountain Bike segment in Exercise 95 for each of the following changes. Consider each change independently of the others.

a. Direct variable expenses were reduced by $33,600. Sales and assets were unaffected.

b. Assets used by the segment were reduced by $540,000, while income and sales were unaffected.

c. An advertising campaign increased sales by $336,000 and income by $50,000. Assets directly used by the segment were unaffected.

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