Consolidated Industries is a diversified manufacturer with business units organized as divisions, including the Reigis Steel Division. Consolidated monitors its divisions on the basis of both unit contribution and return on investment (ROI), with investment defined as average operating assets employed. All investments in operating assets are expected to earn a minimum return of 12% before income taxes. Reigis's cost of goods sold is considered to be entirely variable; however, its administrative expenses do not depend on volume. Selling expenses are a mixed cost with one-third attributed to sales volume. The 2022 operating statement for Reigis follows. The division's operating assets employed were $348,750,000 at November 30, 2022, unchanged from the year before. REIGIS STEEL DIVISION Operating Statement For the Year Ended November 30, 2022 (000s omitted) Sales revenue $ 196,000 Less expenses: Cost of goods sold Administrative expenses Selling expenses $ 101,950 20,000 17,100 139,050 Income from operations, before tax $ 56,950 Required: 1. Calculate Reigis Steel Division's unit contribution if it produced and sold 3,100,000 units during the year ended November 30, 2022. (Round your answer to 2 decimal places.) 2. Calculate the following performance measures for 2022 for Reigis: a. Pretax ROI, based on average operating assets employed. (Round your answer to 2 decimal places.) b. Residual income (RI), calculated on the basis of average operating assets employed. (Enter your answer in whole dollars, not in thousands.) 1. Contribution margin per unit 2a. Return on investment % 2b. Residual income
Consolidated Industries is a diversified manufacturer with business units organized as divisions, including the Reigis Steel Division. Consolidated monitors its divisions on the basis of both unit contribution and return on investment (ROI), with investment defined as average operating assets employed. All investments in operating assets are expected to earn a minimum return of 12% before income taxes. Reigis's cost of goods sold is considered to be entirely variable; however, its administrative expenses do not depend on volume. Selling expenses are a mixed cost with one-third attributed to sales volume. The 2022 operating statement for Reigis follows. The division's operating assets employed were $348,750,000 at November 30, 2022, unchanged from the year before. REIGIS STEEL DIVISION Operating Statement For the Year Ended November 30, 2022 (000s omitted) Sales revenue $ 196,000 Less expenses: Cost of goods sold Administrative expenses Selling expenses $ 101,950 20,000 17,100 139,050 Income from operations, before tax $ 56,950 Required: 1. Calculate Reigis Steel Division's unit contribution if it produced and sold 3,100,000 units during the year ended November 30, 2022. (Round your answer to 2 decimal places.) 2. Calculate the following performance measures for 2022 for Reigis: a. Pretax ROI, based on average operating assets employed. (Round your answer to 2 decimal places.) b. Residual income (RI), calculated on the basis of average operating assets employed. (Enter your answer in whole dollars, not in thousands.) 1. Contribution margin per unit 2a. Return on investment % 2b. Residual income
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:3. Reigis management is presented the opportunity to invest in a project that would earn an ROI of 13%. Reigis is likely to:
accept the project because ROI is higher than the required rate of return.
O reject the project because the ROI would lower the current overall ROI.
O accept the project because positive ROl means a positive dollar value of return.
O reject the project because it poses too much risk.
Transcribed Image Text:Consolidated Industries is a diversified manufacturer with business units organized as divisions, including the Reigis Steel Division.
Consolidated monitors its divisions on the basis of both unit contribution and return on investment (ROI), with investment defined as
average operating assets employed. All investments in operating assets are expected to earn a minimum return of 12% before income
taxes.
Reigis's cost of goods sold is considered to be entirely variable; however, its administrative expenses do not depend on volume.
Selling expenses are a mixed cost with one-third attributed to sales volume. The 2022 operating statement for Reigis follows. The
division's operating assets employed were $348,750,000 at November 30, 2022, unchanged from the year before.
REIGIS STEEL DIVISION
Operating Statement
For the Year Ended November 30, 2022
(000s omitted)
Sales revenue
$ 196,000
Less expenses:
$ 101,950
Cost of goods sold
Administrative expenses
20,000
Selling expenses
139,050
$ 56,950
17,100
Income from operations, before tax
Required:
1. Calculate Reigis Steel Division's unit contribution if it produced and sold 3,100,000 units during the year ended November 30, 2022.
(Round your answer to 2 decimal places.)
2. Calculate the following performance measures for 2022 for Reigis:
a. Pretax ROI, based on average operating assets employed. (Round your answer to 2 decimal places.)
b. Residual income (RI), calculated on the basis of average operating assets employed. (Enter your answer in whole dollars, not in
thousands.)
1. Contribution margin
per unit
2a. Return on investment
%
2b. Residual income
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