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Five years ago, Arlington Industries expanded vertically by acquiring one of its suppliers, Raddix Plastics. Arlington monitors its divisions based on both product 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 retum of 11% before income taxes. Management bonuses are also determined based on ROI. The cost of goods sold at Raddix is fully variable while administrative expenses are not dependent on sales volume. Selling expenses are a mixed cost with 40% attributed to sales volume. Since Arlington acquired Raddix, the ROI at Raddix has ranged from 11.8% to 14.7%. During the fiscal year just ended, Raddix considered a capital acquisition with an estimated ROI of 11.5%; however, division management decided against the capital acquisition because it believed that the capital acquisition would decrease the division's ROI. The abbreviated most recent income statement for Raddix is presented here. The division's operating assets employed were $15,750,000 at year end, a 5% increase over the previous year' end balance. Raddix Plastics Division Income Statement For the Year Ended December 31 (S000 omitted) Sales revenue S25,000 Expenses Cost of goods sold Administrative expenses Selling expenses Income from operations S16,500 3,955 23,155 $ 1,845 2.700 *Source: Retired ICMA CMA Exam Questions. Calculate the unit contribution margin for Raddix Plastics if 1,484,000 units were produced and sold during the fiscal year ended December 31.

Five years ago, Arlington Industries expanded vertically by acquiring one of its suppliers, Raddix Plastics. Arlington monitors its divisions based on both product 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 retum of 11% before income taxes. Management bonuses are also determined based on ROI. The cost of goods sold at Raddix is fully variable while administrative expenses are not dependent on sales volume. Selling expenses are a mixed cost with 40% attributed to sales volume. Since Arlington acquired Raddix, the ROI at Raddix has ranged from 11.8% to 14.7%. During the fiscal year just ended, Raddix considered a capital acquisition with an estimated ROI of 11.5%; however, division management decided against the capital acquisition because it believed that the capital acquisition would decrease the division's ROI. The abbreviated most recent income statement for Raddix is presented here. The division's operating assets employed were $15,750,000 at year end, a 5% increase over the previous year' end balance. Raddix Plastics Division Income Statement For the Year Ended December 31 (S000 omitted) Sales revenue S25,000 Expenses Cost of goods sold Administrative expenses Selling expenses Income from operations S16,500 3,955 23,155 $ 1,845 2.700 *Source: Retired ICMA CMA Exam Questions. Calculate the unit contribution margin for Raddix Plastics if 1,484,000 units were produced and sold during the fiscal year ended December 31.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter5: Business And Economic Forecasting
Section: Chapter Questions
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Five years ago, Arlington Industries expanded vertically by acquiring one of its suppliers, Raddix Plastics. Arlington monitors its divisions based on both product 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 11% before income taxes. Management bonuses are also determined based on ROI. The cost of goods sold at Raddix is fully variable while administrative expenses are not dependent on sales volume. Selling expenses are a mixed cost with 40% attributed to sales volume. Since Arlington acquired Raddix, the ROI at Raddix has ranged from 11.8% to 14.7%. During the fiscal year just ended, Raddix considered a capital acquisition with an estimated ROI of 11.5%; however, division management decided against the capital acquisition because it believed that the capital acquisition would decrease the division's ROI. The abbreviated most recent income statement for Raddix is presented here. The division's operating assets employed were S15,750,000 at year end, a 5% increase over the previous year' end balance. Raddix Plastics Division Income Statement For the Year Ended December 31 (S000 omitted) Sales revenue S25,000 Expenses Cost of goods sold Administrative expenses Selling expenses Income from operations S16,500 3,955 2.700 23,155 $ 1,845 *Source: Retired ICMA CMA Exam Questions. Calculate the unit contribution margin for Raddix Plastics if 1,484,000 units were produced and sold during the fiscal year ended December 31.
Transcribed Image Text:Five years ago, Arlington Industries expanded vertically by acquiring one of its suppliers, Raddix Plastics. Arlington monitors its divisions based on both product 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 11% before income taxes. Management bonuses are also determined based on ROI. The cost of goods sold at Raddix is fully variable while administrative expenses are not dependent on sales volume. Selling expenses are a mixed cost with 40% attributed to sales volume. Since Arlington acquired Raddix, the ROI at Raddix has ranged from 11.8% to 14.7%. During the fiscal year just ended, Raddix considered a capital acquisition with an estimated ROI of 11.5%; however, division management decided against the capital acquisition because it believed that the capital acquisition would decrease the division's ROI. The abbreviated most recent income statement for Raddix is presented here. The division's operating assets employed were S15,750,000 at year end, a 5% increase over the previous year' end balance. Raddix Plastics Division Income Statement For the Year Ended December 31 (S000 omitted) Sales revenue S25,000 Expenses Cost of goods sold Administrative expenses Selling expenses Income from operations S16,500 3,955 2.700 23,155 $ 1,845 *Source: Retired ICMA CMA Exam Questions. Calculate the unit contribution margin for Raddix Plastics if 1,484,000 units were produced and sold during the fiscal year ended December 31.
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