Colonial Pharmaceuticals is a small firm specializing in new products. It is organized into two divisions, which are based on the products they produce. AC Division is smaller and the life of the products it produces tend to be shorter than those produced by the larger SO Division. Selected financial data for the past year is shown as follows. Divisional investment is as of the beginning of the year. Colonial Pharmaceuticals uses a 8 percent cost of capital and uses beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes.

	AC Division			SO Division
Allocated corp. overhead	$	610		$	1,700
Cost of goods sold		3,220			6,800
Divisional investment		9,200			79,000
R&D		2,100			3,500
Sales		8,400			19,000
SG&A		730			1,430

Required:

a. Compute divisional income for the two divisions.

Compute divisional income for the two divisions.

	AC Division	SO Division
Divisional income

b. Calculate the operating margin, which is equivalent to the return on sales, for the two divisions.

c

Calculate the operating margin, which is equivalent to the return on sales, for the two divisions. (Enter your answers as a percentage rounded to 2 decimal places (i.e., 32.16).)

	AC Division		SO Division
Operating margin

c. Calculate ROI for the two divisions.

Calculate ROI for the two divisions. (Enter your answers as a percentage rounded to 2 decimal places (i.e., 32.16).)

	AC Division		SO Division
ROI		%		%

d. Compute residual income for the two divisions.

Compute residual income for the two divisions. (Negative amounts should be indicated by a minus sign.)

	AC Division	SO Division
Residual income