Cumulative Exercise (Chapter 3): ROI, residual income, breakeven point, contribution margin
(CPA) Oslo Company’s industrial photo–finishing division, Rho, incurred the following costs and
expenses in the last period.
During the period, Rho produced 300,000 units of industrial photo prints, which were sold for $2.00 each.
Oslo’s investment in Rho was $500,000 and $700,000 at the beginning and end of the year, respectively.
Oslo’s weighted average cost of capital and required rate of return is 15%.
REQUIRED:
1. Determine Rho’s return on investment for the year.
2. Compute Rho’s residual income (loss) for the year.
3. How many industrial photo print units did Rho have to sell during the year to break even?
4. What was Rho’s contribution margin for the year?
