ROI, Residual Income Raddington Industries steel plates, Keimer Steel Company. To manage the two separate businesses, the operations of Keimer are reported separately as an investment cen produces tool and die machinery for manufacturers. The company expanded vertically in 20x1 by acquiring one of its suppliers of allay ter. Raddington monitors its divisions on the basis of both unit contribution and return on average investment (RO), with invest erage operating assets employed. Management bonuses are determined on ROL. All investments i percent before income taxes. operating assets are expected to earn a minimum return of 14 Keimer's cost of goods sold is considered to be entirely variable, while the division's administrative expenses are not dependent on volume. Selling expenses are a mixed cost with 30 percent attibuted to sales volume. Keimer contemplated a capital acquisit division management decided against the investment because it believed that the investment would decrease Keimer's overal with an estimated ROI of 16.00 percent; however, The 20x2 operating statement for Keimer follows. The division's operating assets employed were $12,041,600 at November 30, over the 20x1 year-end balance. Keimer Steel Company For the Year Ended November 30, 20x2 Sales revenue 25,943,000 Less expenses: Cost of goods sold Administrative expenses Selling expenses $17,381,810 3,854,400 Check Hy Work more Check My Work uses remainng Keimer Steel Company Operating Statement For the Year Ended November 30, 20x2 $25,943,000 Sales revenue Less expenses: $17,381,810 3,854,400 2,797,000 Cost of goods sold Administrative expenses Selling expenses Operating income before income taxes Required 1. Calculate the unit contribution for Keimer Steel Company if 1,228,300 units were produced and sold during the year ended November 30, 20x2. Round your answer to the nearest cent 24,033,210 $1,909,790 per unit 2. Calculate the following performance measures for 20x2 for Keimer Steel Company: a. Pretax return on average investment in operating assets employed (RO1). Round your percentage answer to two decimal places (for example, the decimal 10555 would be entered as "10.56" percent). b. Residual income calculated on the basis of average operating assets employed. $1,909,790 Operating income before income taxes Required: 1. Calculate the unit contribution for Keimer Steel Company if 1,228,300 units were produced and sold during the year ended November 30, 20x2. Round your answer to the nearest cent. per unit 2. Calculate the following performance measures for 20x2 for Keimer Steel Company: a. Pretax return 10555 would be entered as 10.56" percent). on average investment in operating assets employed (ROD), Round your percentage answer to two decimal places (for example, the decimal b. Residual income calculated on the basis of average operating assets employed 3. Explain why the management rather than ROI were used as a performance measure of Keimer Steel Company would have been more likely to accept the contemplated capital acquisition if residual income A. Keimer Steel company is a separate investment center within Raddington Industries. Identify several items that keimer should control if it is to be evaluated fairly by either the RO1 or residual income performance meas ures. (CMA adap
