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Based on an analysis of operations, a company making sporting goods has determined that the income provided by its golf, ski, tennis, and football
Based on an analysis of operations, a company making sporting goods has determined that the income provided by its golf, ski, tennis, and football product lines are $6 million, $8.2 million $2.2 million, and $2.7 million, respectively. The accountant believes that the investment levels in these product lines are $36 million, $70 million, $30 million, and $28 million, respectively. Requirement Use a residual income analysis to evaluate the performance of each of these product lines, assuming that the organization requires a 11% return on investment. Select the formula and calculate residual income for each of the product lines. Then, based on your analysis, evaluate the performance of each of these product lines. (Enter amounts in dollars and not in millions. Enter a "0" for amounts with a zero balance and use a minus sign or parentheses for a residual loss.) Product line Golf Income Cost of capital Residual income (loss) Evaluation Ski Tennis Football The results above . The accountant must determine whether there are reported income figures that could cause the reported results to be quite different than if other assumptions were used. If the income numbers this company must improve its performance in the used in the substantially or think seriously of abandoning them
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