BOWMAN DIVISION
Income Statement
For the Year Ended December 31, Year 2
Sales revenue	$	106,880
Cost of goods sold		59,175
Gross margin		47,705
Operating expenses
Selling expenses		(2,700)
Depreciation expense		(4,095)
Operating income		40,910)
Nonoperating item
Loss on sale of land		(3,100)
Net income	$	37,810

BOWMAN DIVISION
Balance Sheet
As of December 31, Year 2
Assets
Cash	$	12,592
Accounts receivable		40,276
Merchandise inventory		38,000
Equipment less accumulated depreciation		90,308
Nonoperating assets		9,700
Total assets	$	190,876
Liabilities
Accounts payable	$	9,527
Notes payable		68,000
Stockholders equity
Common stock		76,000
Retained earnings		37,349
Total liabilities and stockholder's equity	$	190,876

a. Calculate the ROI for Bowman.

b. Vernon has a desired ROI of 12 percent. Headquarters has $90,000 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 14 percent. The other two divisions have investment opportunities that yield only 13 percent. Calculate the new ROI for Bowman division, if the investment opportunity is adopted by Bowman.

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