Carriage Incorporated manufactures horse carriages. The company has two divisions, Wheels and Assembly. Because of different accounting methods and inflation rates, the company is considering multiple evaluation measures. The following information is provided for 2018:
ASSETSINCOME

The company is currently using a 12% required rate of return.
What are Wheels's and Assembly's return on investment based on book values, respectively?
A) 27%; 12%
B) 27%; 21%
C) 12%; 27%
D) 21%; 27%

Question

Carriage Incorporated manufactures horse carriages. The company has two divisions, Wheels and Assembly. Because of different accounting methods and inflation rates, the company is considering multiple evaluation measures. The following information is provided for 2018:
ASSETSINCOME

The company is currently using a 12% required rate of return.
What are Wheels's and Assembly's return on investment based on book values, respectively?
A) 27%; 12% 
B) 27%; 21% 
C) 12%; 27% 
D) 21%; 27%

Quizplus · Accepted Answer

Book value ROI:
Wheels:	$130,000 / $485,000 = 27%
Assembly:	$$170,000 / $800,000 = 21%

Carriage Incorporated Manufactures Horse Carriages