88.

Sales 800,000
Operating expenses (650,000)
Net Operating income 150,000
Minimum required return (600,000x.12) (72,000)
Residual income 78,000

89. Net operating income 150,000

Average operating assets = 600,000
ROI = 25%

Questions 9 and 10 are based on the following data:

Oslo Co.’s industrial photo-finishing division, Rho, incurred the following costs and expenses in 2006:
Variable Fixed
Direct materials P200,000
Direct Labor 150,000
Factory overhead 70,000 P42,000
General, selling, and administrative 30,000 48,000
Totals P450,000 P90,000

During 2006, Rho produced 300,000 units of industrial photo-prints, which were sold for P2 each. Rho’s
average operating assets were 1,000,000 for 2006. The division is required to earn a minimum return of
15% on average operating assets.

90. For the year ended December 31,2006, Rho’s ROI was:
a. 10.0% c. 37.5%
b. 6.0% d. 25.0%