Adrenaline Sports Company makessnowboards, downhillskis, cross-countryskis, skateboards,surfboards, and inline skates. The company has found it beneficial to split operations into two divisions based on the climate required for thesport: Snow Sports andNon-snow Sports. The following divisional information is available for the pastyear:

Snow Sports

Net Sales Revenue 5,000,000

Operating Income 950,000

Average Total Assets 4,300,000

ROI 22.1%

Non-snow Sports

Net Sales Revenue 8,000,000

Operating Income 1,520,000

Average Total Assets 6,400,000

ROI 23.8%

Adrenaline's management has specified a 14% target rate of return. Compute eachdivision's RI. Interpret your results. Are your results consistent with eachdivision's ROI?

First, select the formula to calculate residual income(RI)