Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of capital of 20 percent. Selected financial information (in thousands of dollars) for the first year of business follows:

	East			West
Sales revenue	$	1,700		$	6,400
Income		445			600
Investment (beginning of year)		3,400			4,400
Current liabilities (beginning of year)		270			270
R&D expendituresa		850			750

^aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year.

Required:

a-1. Evaluate the performance of the two divisions assuming BMI uses residual income.

Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of capital of 20 percent. Selected financial information (in thousands of dollars) for the first year of business follows: East $1,700 445 Sales revenue Income Investment (beginning of year) Current liabilities (beginning of year) R&D expendituresa 3,400 West $6,400 600 4,400 270 750 270 850 aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming BMI uses residual income. (Enter answers in thousands of dollars. Negative amounts should be indicated by a minus sign.) Divisions Residual Income East West a-2. Which division had the better performance? o West O East