Management of Nan Mischke Company wishes to earn a 25 percent return on assets employed by all segments. Assets employed by the Northern Territory amount to $500,000, while fixed costs directly attributable to this product line amount to $86,000. The accountant for this territory informs you that the variable cost per unit is $5.50.

Required:

a. Calculate how many units must be sold if the sales price is $8 per unit to earn the desired rate of return.

b. Determine breakeven sales in units for this division.

d.

Compute the rate of return earned if 60,000 units were sold at a $7.50 sales price.

Calculate the segment’s residual income assuming an interest rate of 12 percent if 75,000 units are sold at an $8 unit sales price.