Question

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

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

Homework Answers

Answer #1

Solution:-

Lager Lite Lager
Contribution margin $500,000 $300,000
Controllable margin $200,000

= 28% * $1,200,000

= $336,000 (c)

Average operating assets

= $200,000 / 16%

= $1,250,000 (a)

$1,200,000
Minimum rate of return

= 16% - [ $100,000 /  $1,250,000 ]

= 16% - 0.08

= 0.16 - 0.08

= 0.08

= 8% (b)

11 %
Return on investment 16 %

= [ $204,000 /  $1,200,000 ] + 11%

= 0.28

= 28% (d)

Residual income $100,000 $204,000
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