Five years ago, Arlington Industries expanded vertically by acquiring one of its suppliers, Raddix Plastics. Arlington monitors its divisions based on both product 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 retum of 11% before income taxes. Management bonuses are also determined based on ROI. The cost of goods sold at Raddix is fully variable while administrative expenses are not dependent on sales volume. Selling expenses are a mixed cost with 40% attributed to sales volume. Since Arlington acquired Raddix, the ROI at Raddix has ranged from 11.8% to 14.7%. During the fiscal year just ended, Raddix considered a capital acquisition with an estimated ROI of 11.5%; however, division management decided against the capital acquisition because it believed that the capital acquisition would decrease the division's ROI. The abbreviated most recent income statement for Raddix is presented here. The division's operating assets employed were $15,750,000 at year end, a 5% increase over the previous year' end balance. Raddix Plastics Division Income Statement For the Year Ended December 31 (S000 omitted) Sales revenue S25,000 Expenses Cost of goods sold Administrative expenses Selling expenses Income from operations S16,500 3,955 23,155 $ 1,845 2.700 *Source: Retired ICMA CMA Exam Questions. Calculate the unit contribution margin for Raddix Plastics if 1,484,000 units were produced and sold during the fiscal year ended December 31.
Five years ago, Arlington Industries expanded vertically by acquiring one of its suppliers, Raddix Plastics. Arlington monitors its divisions based on both product 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 retum of 11% before income taxes. Management bonuses are also determined based on ROI. The cost of goods sold at Raddix is fully variable while administrative expenses are not dependent on sales volume. Selling expenses are a mixed cost with 40% attributed to sales volume. Since Arlington acquired Raddix, the ROI at Raddix has ranged from 11.8% to 14.7%. During the fiscal year just ended, Raddix considered a capital acquisition with an estimated ROI of 11.5%; however, division management decided against the capital acquisition because it believed that the capital acquisition would decrease the division's ROI. The abbreviated most recent income statement for Raddix is presented here. The division's operating assets employed were $15,750,000 at year end, a 5% increase over the previous year' end balance. Raddix Plastics Division Income Statement For the Year Ended December 31 (S000 omitted) Sales revenue S25,000 Expenses Cost of goods sold Administrative expenses Selling expenses Income from operations S16,500 3,955 23,155 $ 1,845 2.700 *Source: Retired ICMA CMA Exam Questions. Calculate the unit contribution margin for Raddix Plastics if 1,484,000 units were produced and sold during the fiscal year ended December 31.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
100%
Transcribed Image Text:Five years ago, Arlington Industries expanded vertically by acquiring one of its suppliers,
Raddix Plastics. Arlington monitors its divisions based on both product 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 11% before income
taxes. Management bonuses are also determined based on ROI. The cost of goods sold at
Raddix is fully variable while administrative expenses are not dependent on sales volume.
Selling expenses are a mixed cost with 40% attributed to sales volume. Since Arlington acquired
Raddix, the ROI at Raddix has ranged from 11.8% to 14.7%. During the fiscal year just ended,
Raddix considered a capital acquisition with an estimated ROI of 11.5%; however, division
management decided against the capital acquisition because it believed that the capital
acquisition would decrease the division's ROI. The abbreviated most recent income statement
for Raddix is presented here. The division's operating assets employed were S15,750,000 at year
end, a 5% increase over the previous year' end balance.
Raddix Plastics Division Income Statement
For the Year Ended December 31 (S000 omitted)
Sales revenue
S25,000
Expenses
Cost of goods sold
Administrative expenses
Selling expenses
Income from operations
S16,500
3,955
2.700
23,155
$ 1,845
*Source: Retired ICMA CMA Exam Questions.
Calculate the unit contribution margin for Raddix Plastics if 1,484,000 units were
produced and sold during the fiscal year ended December 31.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education