chapter 11 formulas

Question 1

controllable margin

Answer 1

contribution margin - controllable fixed costs

Question 2

Return on investment

Answer 2

Controllable margin / avg operating assets (total assets / #)

Question 3

Residual Income

Answer 3

Controllable margin - (minimum ROI x Avg Operating assets)

Question 4

Average Operating assets

Answer 4

add up all operating assets / # of assets you added up

Question 5

Economic Value added

Answer 5

investment centre’s operating profit after tax - (weighted avg cost of capital x total capital assests)

Question 6

Improving Roi - Expanded form

Answer 6

(operating income/ sales) x (sales / operating
assets) = ROI

Profit margin x investment turnover = ROI