Question

Presented below is information related to the Southern Division of Riverbed, Inc. Contribution margin $1,212,400 Controllable margin $1,020,000 Average operating assets $4,080,000 Minimum rate of return 17 % Compute the Southern Division’s return on investment and residual income.

Return on investment enter the return on investment in percentages

Residual income $enter the residual income in dollars

show how you got it please!

Answer #1

Residual income is defined as
A. variable contribution margin less the minimum rate of return
on average operating assets.
B. controllable income less the minimum rate of return on
average operating assets.
C. contribution margin less controllable fixed costs.
D. controllable margin divided by average operating assets.

Presented below is selected financial information for two
divisions of Samberg Brewing. Supply the missing information for
the lettered items.
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

Presented 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%.) 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

Presented below is selected information for two divisions of
Juliana Company:
Eastern
Western
Sales
$600,000
$750,000
Controllable margin
50,000
70,000
Average operating assets
100,000
200,000
Calculate the return on investment for each division.
(Round answers to 2 decimal places, e.g.
15.25%.)
Return on
investment
Eastern division
%
Western division
%
What is the residual income for each division if the required
rate of return is 12%?
Residual
Income
Eastern division
$
Western division
$

Jarriot, Inc., presented two years of data for its Furniture
Division and its Houseware Division. Furniture Division: Year 1
Year 2 Sales $32,670,000 $35,000,000 Operating income 1,339,470
1,435,000 Average operating assets 10,000,000 10,000,000 Houseware
Division: Year 1 Year 2 Sales $12,260,000 $12,691,000 Operating
income 576,220 469,567 Average operating assets 5,000,000 5,000,000
Required: Round the ROI and margin percentages to two decimal
places (for example, enter the decimal .10555 as "10.56" percent).
Round the turnover ratio to two decimal places.
1....

The manager of the snack division of Fairfax Industries is
evaluated on her division’s return on investment and residual
income. The company requires that all divisions generate a minimum
return on invested assets of 8 percent. Consistent failure to
achieve this minimum target is grounds for the dismissal of a
division manager. The annual cash bonus paid to division managers
is 1 percent of residual income in excess of $100,000. The snack
division’s operating margin for the year was $8.337...

The manager of the snack division of Fairfax Industries is
evaluated on her division’s return on investment and residual
income. The company requires that all divisions generate a minimum
return on invested assets of 8 percent. Consistent failure to
achieve this minimum target is grounds for the dismissal of a
division manager. The annual cash bonus paid to division managers
is 1 percent of residual income in excess of $100,000. The snack
division’s operating margin for the year was $9.737...

The manager of the snack division of Fairfax Industries is
evaluated on her division’s return on investment and residual
income. The company requires that all divisions generate a minimum
return on invested assets of 8 percent. Consistent failure to
achieve this minimum target is grounds for the dismissal of a
division manager. The annual cash bonus paid to division managers
is 1 percent of residual income in excess of $100,000. The snack
division’s operating margin for the year was $9.56...

Residual Income and Investment Decisions. Jarriot, Inc.,
presented two years of data for its Furniture Division and its
Houseware Division.
Furniture Division:
Year 1
Year 2
Sales
$35,700,000
$37,700,000
Operating income
1,420,000
1,520,000
Average operating assets
2,750,000
2,750,000
Houseware Division:
Year 1
Year 2
Sales
$11,500,000
$12,600,000
Operating income
660,000
540,000
Average operating assets
5,500,000
5,500,000
At the end of Year 2, the manager of the Houseware Division is
concerned about the division’s performance. As a result, he...

Residual Income and Investment Decisions
Jarriot, Inc., presented two years of data for its Furniture
Division and its Houseware Division.
Furniture Division:
Year 1
Year 2
Sales
$35,100,000
$37,800,000
Operating income
1,430,000
1,550,000
Average operating assets
4,560,000
4,560,000
Houseware Division:
Year 1
Year 2
Sales
$11,900,000
$12,600,000
Operating income
630,000
570,000
Average operating assets
5,900,000
5,900,000
At the end of Year 2, the manager of the Houseware Division is
concerned about the division’s performance. As a result, he...

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