a] determine the residual income for each division b] which division has the mos
ID: 2423678 • Letter: A
Question
a] determine the residual income for each division b] which division has the most residual income? 9:54 PM * 65% D The income from operations and the amount of invested assets in each division of Steele Industries are as follows. a] compute the rate of return on investment for each division b] which division is the most profitable per dollar invested? for Invested Income from Assets $650,000 $130,000 400,000 Retail Division Commercial Division Internet Division 72,000 550,000 137,500 tfor for each division.
Explanation / Answer
Answer:a) Calculation of the Residual income:
Residual income = Operating Income - (Operating Assets x Target Rate of Return)
Retail Division=130000-(650000*8%)=78000
Commercial Division=72000-(400000*8%)=40000
Internet Division=137500-(550000*8%)=93500
Answer:b) Internet division is the most residual income.
Answer: a) Return on Investment=(Income From operations/Invested assets)*100
Retail Division=(130000/650000)*100=20%
Commercial Division=(72000/400000)*100=18%
Internet Division=(137500/550000)*100=25%
Answer:b) Internet division is the most profitable per dollar invested because rate of return on investment is higher than other division.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.