Divisions North West South (a) Open Show Work SHOW SOLUTION SHOW ANSWER LINK TO
ID: 2576323 • Letter: D
Question
Divisions
North
West
South
(a)
Open Show Work
SHOW SOLUTION
SHOW ANSWER
LINK TO TEXT
(b)
Open Show Work
SHOW SOLUTION
LINK TO TEXT
SAVE FOR LATER
SUBMIT ANSWER
(c)
The parts of this question must be completed in order. This part will be available when you complete the part above.
Divisions
North
West
South
(a)
Open Show Work
SHOW SOLUTION
SHOW ANSWER
LINK TO TEXT
(b)
Open Show Work
SHOW SOLUTION
LINK TO TEXT
SAVE FOR LATER
SUBMIT ANSWER
(c)
The parts of this question must be completed in order. This part will be available when you complete the part above.
Divisions
North
West
South
(a)
Open Show Work
SHOW SOLUTION
SHOW ANSWER
LINK TO TEXT
(b)
Open Show Work
SHOW SOLUTION
LINK TO TEXT
SAVE FOR LATER
SUBMIT ANSWER
(c)
The parts of this question must be completed in order. This part will be available when you complete the part above.
Divisions
North
West
South
(a)
Open Show Work
SHOW SOLUTION
SHOW ANSWER
LINK TO TEXT
(b)
Open Show Work
SHOW SOLUTION
LINK TO TEXT
SAVE FOR LATER
SUBMIT ANSWER
(c)
The parts of this question must be completed in order. This part will be available when you complete the part above.
Divisions
North
West
South
(a)
Open Show Work
SHOW SOLUTION
SHOW ANSWER
LINK TO TEXT
(b)
Open Show Work
SHOW SOLUTION
LINK TO TEXT
SAVE FOR LATER
SUBMIT ANSWER
(c)
The parts of this question must be completed in order. This part will be available when you complete the part above.
Divisions
North
West
South
(a)
Open Show Work
SHOW SOLUTION
SHOW ANSWER
LINK TO TEXT
(b)
Presented below is selected information for three regional divisions of Medina Company.Divisions
North
West
South
Contribution margin $300,000 $500,000 $400,000 Controllable margin $140,000 $360,000 $210,000 Average operating assets $1,000,000 $2,000,000 $1,500,000 Minimum rate of return 13 % 16 % 10 %Explanation / Answer
Solution:
Part b --- Residual Income
Residual Income is the income over and above the minimum required income. Mathematically,
Residual Income = Net Income – Minimum Required Return
Here in the question controllable margin is given. Controllable Margin is the contribution margin less the controllable fixed costs. Hence we can assume it Net Income for solving this question.
Calculation of Minimum Required Return
Divisions
North
West
South
Average Operating Assets (A)
$1,000,000
$2,000,000
$1,500,000
Minimum Rate of Return (B)
13%
16%
10%
Minimum Required Return (C=A*B)
$130,000
$320,000
$150,000
Calculation of Residual Income
Divisions
North
West
South
Controllable Margin (P)
$140,000
$360,000
$210,000
Minimum Required Return (as calculated above) (M)
$130,000
$320,000
$150,000
Residual Income (P-M)
$10,000
$40,000
$60,000
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Divisions
North
West
South
Average Operating Assets (A)
$1,000,000
$2,000,000
$1,500,000
Minimum Rate of Return (B)
13%
16%
10%
Minimum Required Return (C=A*B)
$130,000
$320,000
$150,000