Answer:
(1)
ROI = Net operating income /Average operating assets
21% = X / 160,000
x =21% *160,000
x =33,600
Residual income = Net operating income – (Minimum required rate of return x Averageoperating assets)
x = 33600 -(16% *160,000)
x = 33600 -(25600)
x =33600-25600
x = 8000
Residual income =8000
(2)
ROI = Net operating income /Average operating assets
18% =36000 / x
X = 36000/18%
X =200,000
Average operating assets= 200,000
Residual income = Net operating income – (Minimum required rate of return x Averageoperating assets)
Residual income=36000-60000
Residual income=-24000
(3)
There are three missing figure in the 3rd situation i.e Net operating income, return on investment and minimum required rate of return . Figure of any one of them required without it would be impossible to make further calculation
| Sales | 340000 | 690000 | $600,000 |
| Net operating income | 33600 | 36000 | x |
| Average operating assets | $160,000 | 200000 | $156,000 |
| Return on investment (ROI) | 21% | 18% | x |
| Minimum required rate of return: | |||
| Percentage | 16% | ||
| Dollar amount | $60,000 | x | |
| Residual income | 8000 | -24000 | $7,000 |
