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3) The Division A of Standard Products is planning its 2016 operating budget. Average operating assets of S1,500,000 will be used during in the division
3) The Division A of Standard Products is planning its 2016 operating budget. Average operating assets of S1,500,000 will be used during in the division during the year and per-unit selling prices are expected to average $100. Variable costs of the division are budgeted at $400,000, while fixed costs are set at $250,000. The company's required rate of return for purposes of calculating residual income (RI) is 18%. Required: 1. Compute the sales volume (in units) necessary for Division A to achieve a 20% ROI in 2016. 2. The division manager receives a bonus of 50% ofresidual income (RI). What is his anticipated bonus for 2016 for the division manager, assuming she achieves the 20% ROI target specified in part (1)? below
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