Question
The following information is available about the status and operations for Division B of Bentley Company, which has a minimum required ROI of 20%. Answer
The following information is available about the status and operations for Division B of Bentley Company, which has a minimum required ROI of 20%. Answer each item independently of the others.
Results | Division B |
Divisional investment | $1,500,000 |
Divisional profit | $550,000 |
Divisional sales | $3,600,000 |
Requirements:
Compute the residual income for Division B | |
Division B could increase its profit by $25,000 by increasing its investment by $100,000. Compute its new residual income | |
Division B could increase its profit margin ratio by one percentage point (for example: from 13% to 14%), without increasing total sales or investment. Compute its new residual income. | |
Division B could reduce its investment so that its asset turnover increased by one time, while holding total sales and profit constant. Compute its new residual income. |
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