BOWMAN DIVISION Income Statement For the Year Ended December 31, 2018

Sales revenue $ 105,580

Cost of goods sold 60,175

Gross margin 45,405

Operating expenses Selling expenses (2,670 )

Depreciation expense (4,175 )

Operating income 38,560

Nonoperating item Loss of sale of land (3,600) )

Net income $ 34,960

BOWMAN DIVISION Balance Sheet As of December 31, 2018 Assets

Cash $ 12,662

Accounts receivable 40,346

Merchandise inventory 36,700

Equipment less accumulated depreciation 90,438

Nonoperating assets 9,900

Total assets $ 190,046

Liabilities

Accounts payable $ 9,577

Notes payable 68,000

Stockholders' equity Common stock 72,000

Retained earnings 40,469

Total liabilities and stockholder's equity $ 190,046

Required:

C) Calculate the ROI for Bowman.

D) Rundle has a desired ROI of 13 percent. Headquarters has $93,000 of funds to assign to its investment centers. The manager of the Bowman Division has an opportunity to invest the funds at an ROI of 15 percent. The other two divisions have investment opportunities that yield only 14 percent. Calculate the new ROI for the Bowman division, if the investment opportunity is adopted by Bowman.

E) Based on the original data, calculate the original residual income. Also, calculate the new residual income based on information provided in Requirement d.