Exercise 14-32 (Algo) Comparing Business Units Using Residual Income (LO 14-3)

Universal Electronics, Inc. (UEI), which started operations one year ago, has two divisions: Consumer and Commercial. Both divisions invest heavily in R&D, which is assumed to benefit five years. R&D spending is made uniformly throughout the year. UEI has a cost of capital of 11 percent. Selected financial information for the two divisions (in thousands of dollars) for the year just completed follows.

	Consumer				Commercial
Sales revenue	$	30,000			$	49,000
Divisional income		5,310				5,535
Divisional investment		29,500				30,750
Current liabilities		1,800				1,600
R&D		1,800				1,800

Required:

Evaluate the performance of the two divisions assuming UEI uses residual income. (Enter your answers in dollars rounded to 1 decimal place.)

RI of consumer division_______________

RI of commercial division______________