Question
4 Assessment 4 Part 3: Comparing Business Units Using Divisional Income, ROI, and Residual Income Scenario: Wellness Pharmaceuticals is a small firm specializing in
4 Assessment 4 Part 3: Comparing Business Units Using Divisional Income, ROI, and Residual Income Scenario: Wellness Pharmaceuticals is a small firm specializing in new products. It is organized into two divisions, based on the products they produce. BD Division is smaller and the life of the products it produces tend to be shorter than those produced by the larger PM Division. Selected financial data for the past year is shown below. Divisional investment is as of the beginning of the year. Wellness Pharmaceuticals uses a 9 percent cost of capital and beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes.e building. The following information (in $000s) appears in the accounting records for last year: 5 6 7 Allocated Corporate Overhead 8 Cost of Goods Sold 9 Divisional Investment 10 Research and Development 11 Sales 12 SG&A BD Division PM Division $660 $1,980 3,520 7,700 9,900 88,000 2,200 3,960 8,800 2,200 770 1,683
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