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 in ormation or the lettered items. Round minimum rate of return and R to ec na p ace, e g 10 5% and round average operating assets decimal places e.g. 58,971.) Lager $499,500 200,000 Lite Lager $299,200 Contribution margin Controllable margin Average operating assets (a) $1,199,000 | % (b) 11 % Minimum rate of return Return on investment Residual income 19 % % (d) $100,900 $203,400

Explanation / Answer

Ans. Lager Lite Lager Contribution margin 499500 299200 Controllable margin 200000 335290 Average operating assets 1052632 1199200 Minimum rate of return 9.4% 11% Return on investment 19% 27.96% or 28% Residual income 100900 203400 *Calculations for Lager: Average operating assets = Controllable margin / Return on investment 200000 / 19% 1052632 Minimum rate of return =   (Controllable margin - Residual income) / Average operating assets * 100 (200000 - 100900) / 1052632 * 100 9.4% *Calculations for Lite Lager: Controllable margin   =   Residual income + (Average operating assets * minimum rate of return) 203400 + (1199000*11%) 335290 Return on investment =   Controllable margin / Average operating assets * 100 335290 / 1199000 * 100 27.96% or      28%

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