Exercise 22-21 Presented below is selected financial information for two divisio

Question

Exercise 22-21 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% and round average operating assets to O decimal places e.g. 58,971.) Lager $499,800 201,000 Lite Lager $301,000 Contribution margin Controllable margin Average operating assets s Minimum rate of return Return on investment Residual income (a) $1,200,300 % (b) 12 % 23 % % (d) $100,600 $204,000 LINK TO TEXT

Explanation / Answer

Ans. Lager Lite Lager Contribution margin 499800 301000 Controllable margin 201000 348036 Average operating assets 873913 1200300 Minimum rate of return 11.50% 12% Return on investment 23% 28% Residual income 100600 204000 *Calculations for Lager: Average operating Assets = Controllable margin / Return on investment 201000 / 0.23 873913 Minimum rate of return = (Controllable margin - Residual income) / Average operating assets (201000 - 100600) / 873913    100400 / 873913 0.114886 or 11.5% *Calculations for Lite Lager: Controllable margin = Residual income + (Average operating assets * Minimum rate of return) 204000 + (1200300 * 12%) 204000 + 144036 348036 Return on investment    =   Controllable margin / Average operating assets * 100 348036 / 1200300 * 100 28.9958 28%

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