Question
ROI and Residual Income:Basic Computations Watkins Associated Industries is a highly diversified company with three divisions: Trucking, Seafood, and Construction. Assume that the company uses
ROI and Residual Income:Basic Computations Watkins Associated Industries is a highly diversified company with three divisions: Trucking, Seafood, and Construction. Assume that the company uses return on investment and residual income as two of the evaluation tools for division managers. The company has a minimum desired rate of return on investment of 10 percent with a 30 percent tax rate. Selected operating data for three divisions of the company follow.
| Trucking Division | Seafood Division | Construction Division | |
|---|---|---|---|
| Sales | $1,200,000 | $780,000 | $900,000 |
| Operating assets | 600,000 | 260,000 | 330,000 |
| Net operating income | 101,000 | 60,000 | 62,000 |
(a) Compute the return on investment for each division. (Round answers to three decimal places.) Trucking ROI = Answer
Seafood ROI = Answer
Construction ROI = Answer
(b) Compute the residual income for each division.
| Residual Income | Trucking | Seafood | Construction |
|---|---|---|---|
| Net operating income |
|
|
|
| Minimum level |
|
|
|
| Residual income |
|
|
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Stand Up To The Irs How To Handle Audit Tax Bill And Tax Count
Authors: Frederick W. Daily, Robin Leonard
1st Edition
0873373375, 978-0873373371
