Question 1 Johanssen Company reported the following information for 2012: The co

Question

Question 1

Johanssen Company reported the following information for 2012:

The company's operating income for 2012 was:

A. $58,500.

B. $120,300.

C. $46,500.

D. $70,500.

Question 2

Home Town Grocery has invested in yogurt stands for its stores. The investment cost the company $100,000. Variable materials, preparation, and marketing costs are expected to be $1.25 a unit and fixed costs are estimated at $7,300 a year. If actual sales were 21,300 servings, what would the ROI be at a sales price of $2.35? (Round your final answer to 2 decimal places.)

A. 42.76%

B. 16.13%

C. 23.43%

D. 36.26%

  Sales $802,000   Average Operating Assets $390,000   Desired ROI 15%   Residual Income $ 12,000

Explanation / Answer

Question 1

Johanssen Company reported the following information for 2012:

So, the Desired ROI = $390,000 * 15% = $58,500

The company's operating income for 2012 was: Desired ROI + Residual Income

=> $58,500 + $12,000 = $70,500

Question 2

Home Town Grocery has invested in yogurt stands for its stores. The investment cost the company $100,000. Variable materials, preparation, and marketing costs are expected to be $1.25 a unit and fixed costs are estimated at $7,300 a year. If actual sales were 21,300 servings, what would the ROI be at a sales price of $2.35? (Round your final answer to 2 decimal places.)

So, the contribution per serving = $2.35 - $1.25 = $1.10 per serving

The total contribution on yearly 21,300 servings = $1.10 * 21,300 = $23,430

The cost for return for the consideration of ROI would be total cost i.e. variable cost + fixed cost.

therefore, Total profit or return from the operation = $23,430 - $7,300 = $16,130

% age of Return of Investment = $16,130 / $100,000 (investment) = 16.13%

  Sales $802,000   Average Operating Assets $390,000   Desired ROI 15%   Residual Income $ 12,000

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