1. Wryski Corporation had net operating income of $150,000 and average operating assets of $500,000. The company requires a return on investment of 19%. SHOW ALL WORK.

Required:

a. Calculate the company's current return on investment.

b. Calculate the company%u2019s current residual income.

The company is investigating an investment of $400,000 in project that will generate annual net operating income of $78,000.

c. What is the return on investment of the project?

d. What is the residual income of the project?

e. Should the company invest in this project? Why or why not? Explain your answer.

EXTRA CREDIT (Worth 4 pts total; 2 pts each question):

Licuado Juice Company has four product lines; Orange, Tomato, Carrot, and Grape. Shown below is last year's income statement segmented by product line:

Orange Tomato Carrot Grape

sales.................................. $60,000 $32,000 $24,000 $44,000

variable expenses................. 22,800 11,200 12,000 17,600

Contribution margin.............. 37,200 20,800 12,000 26,400

Traceable fixed expenses....... 12,000 8,000 9,000 6,600

Segment margin...................... $25,200 $12,800 $3,000 $19,800 Net operating income last year for Licuado Company as a whole was $24,800.

2. If the Carrot product line would have been dropped at the beginning of last year, how would this have changed the net operating income of Licuado Company as a whole? A. $2,400 increase B. $3,000 decrease C. $5,400 increase D. $12,000 decrease

3. Licuado is considering the implementation of a $5,000 advertising program specifically targeted at one of the four product lines. The program is expected to increase sales for any one of the product lines by $12,000. If the goal is to maximize the company's net operating income, for which product line should Licuado implement the advertising program? A. Orange B. Tomato C. Carrot D. Grape E. any one of the product lines; the effect on net operating income will be identical