Question
The income from operations and the amount of invested assets in each division of Devon Industries are as follows: Income from Operations Invested Assets Sporting
The income from operations and the amount of invested assets in each division of Devon Industries are as follows:
| Income from Operations | Invested Assets | |||
| Sporting Goods Division | $134,900 | 710,000 | ||
| Health Care Division | 84,800 | 530,000 | ||
| Commercial Division | 37,800 | 270,000 | ||
a. Compute the rate of return on investment for each division. (Round to the nearest whole number.)
| Division | Percent |
| Sporting Goods Division | % |
| Health Care Division | % |
| Commercial Division | % |
b. Which division is the most profitable per dollar invested?
The income from operations and the amount of invested assets in each division of Devon Industries are as follows:
| Income from Operations | Invested Assets | |||
| Sporting Goods Division | $160,600 | 730,000 | ||
| Health Care Division | 105,000 | 420,000 | ||
| Commercial Division | 113,400 | 630,000 | ||
Assume that management has established a 8% minimum acceptable rate of return for invested assets.
a. Determine the residual income for each division.
| Sporting Goods Division | Health Care Division | Commercial Division | |||||||
| Income from operations | $160,600 | $105,000 | $113,400 | ||||||
| Minimum amount of income from operations | |||||||||
| Residual income | $ | $ | $ | ||||||
b. Which division has the most residual income?
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