The manager of the Fleet division of Potlatch Automotive is evaluated on her divisions return on investment and residual income. The company requires that all divisions generate a minimum return on invested assets of 15 percent. Consistent failure to achieve this minimum target is grounds for the dismissal of a division manager. The annual cash bonus paid to division managers is 2 percent of residual income in excess of $75,000. The Fleet divisions operating margin for the year was $800,000, during which time its average invested capital was $4,000,000.

Required:

a. Compute the Fleet divisions return on investment and residual income.

b. Will the manager of the Fleet division receive a bonus for her performance? If so, how much will it be?

c. In reporting her investment centers performance for the past 10 years, the manager of the Fleet division accounted for the depreciation of her divisions assets by using an accelerated depreciation method allowed for tax purposes. As a result, virtually all of the assets under her control are fully depreciated. How would the use of the accelerated method of depreciation affect ROI?

Complete this question by entering your answers in the tabs below. Required A Required B Required Compute the Fleet division's return on investment and residual income. % Return on investment Residual income Required Required B > Required A Required B Required C Will the manager of the Fleet division receive a bonus for her performance? If so, how much will it be? (Leave no cell blank; if there is no bonus enter "O".) Manager's bonus (Required A Required