Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed
image text in transcribed
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 2019 operating statement for Reigis follows. The division's operating assets employed were $315,250,000 at November 30, 2019, unchanged from the year before. REIGIS STEEL DIVISION Operating Statement For the Year Ended November 30, 2019 (000s omitted) Sales revenue 5176,000 Less expenses Cost of goods sold 589,700 Administrative expenses 10.000 Selling expenses 15,300 123.000 Income from operations, before tax 5 53,000 Required: 1. Calculate Relgis Steel Division's unit contribution if it produced and sold 2.900.000 units during the year ended November 30, 2019 (Round your answer to 2 decimal places.) 2. Calculate the following performance measures for 2019 for Regis Pretax ROL based on average operating assets employed. (Round your answer to 2 decimal places) Residual income calculated on the basis of average operating assets employed. (Enter your answer in whole dollars, not in thousands) 1 Contribution margin 2a. Return on investment 26. Residual income per unit % 3. Reigis management is presented the opportunity to invest in a project that would eam an ROI of 13%Reigis is likely to O accept the project because ROI is higher than the required rate of return reject the project because the ROI would lower the current overall ROI O accept the project because positive ROI means a positive dollar value of retur, reject the project because it poses too much risk

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting A Global Perspective

Authors: Robert Libby, Patricia Libby, Daniel G Short

5th Edition

0071107746, 978-0071107747

More Books

Students also viewed these Accounting questions