Brief Exercise 22-12 Presented below is information related to the Southern Divi

Question

Brief Exercise 22-12 Presented below is information related to the Southern Division of Lumber, Inc.
Contribution margin $1,211,900 Controllable margin $895,114 Average operating assets $4,068,700 Minimum rate of return 18 %
Compute the Southern Division’s return on investment and residual income.
Return on investment
% Residual income $
Brief Exercise 22-12 Presented below is information related to the Southern Division of Lumber, Inc. Contribution margin Controllable margin Average operating assets Minimum rate of return $1,211,900 $895,114 $4,068,700 18% Compute the Southern Division's return on investment and residual income. Return on investment Residual income Click if you would like to Show Work for this question: Open Show Work By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor Question Attempts: 0 of 5 used SAVE FOR LATER SUBMIT ANSWER

Explanation / Answer

ANSWER:

caluculation of return of investment and residual income :

Return on Investments

NOI / Average Operating Assets

ROI = Controllable Margin ÷ Average Operating Assets

   Controllable margin $895,114

Average operating assets $4,068,700

ROI = $895,114 /4068700

=0.22

Residual income =  NOI - (Average Operating Assets * Minimum Required Return Rate)

= 1211900-( $4,068,700 *18%)

= 1211900 - 732366

479534

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