Question

Resented below is selected financial information for two divisions of Samberg Brewing. Supply the missing information for the lettered items. (Round minimum rate of return and ROI to 1 decimal place, e.g. 10.5% and round average operating assets to 0 decimal places e.g. 58,971.)
Lager Lite Lager
Contribution margin $500,000 $300,000
Controllable margin 200,000 (c)
Average operating assets $ (a) $1,200,000
Minimum rate of return %(b) 11 %
Return on investment 16 % % (d)
Residual income $100,000 $204,000

Answer 1

Answer:

(a)average assets lager1,250,000

(b) minimun RoR lager=0.08 = 8%

(c) 336,000 controllable margin lite lager

(d) 28% RoI lie lager

Explanation:

Lager

CM 500,000

Controllable Margin 200,000

Average Operating assets: 1,250,000(a)

(a)ROI = 16% = 200,000/assets = 0.16 = 1,250,000

Minimun RoR (b) 8%

Residual Income :  Operating Income - operating Income at minimun return

Residual Income: Operating income - Assets x minimun return

100,000 = 200,000 - 1,250,000 x rate

rate = 100,000/1,250,000 = 0.08

Lite Lager

CM 300,000

Average operating Assets 1,200,000 = the amount invested by Samber Brewing in this divisio. This is the amount we use to determinate the ROI

Minimun rate of return 11%

Retun on Investment .28%

Residual Income  204,000

Residual Income :  Operating Income - operating Income at minimun return

Residual Income: Operating income - Assets x minimun return

204,000    =        Operating Income - 1,200,000 x 0.11

204,000 + 132,000 = Operating Income

336,000 = Operating Income = controllable margin

Return on Investment = operating income/investment of Samberg Brewing

336,000/1,200,000 = 0.28