ABC Company operates two divisions with the following operating Information for the month of May. Division 1: sales, $148,000; operating Income, $49,580; operating assets, $370,000. Division 2: sales, $94,000; operating Income, $48,316; operating assets, $470,000. ABC Company expects a minimum return of 10% should be earned from all Investments. Required: a. Prepare ABC Company's ROI analysis using the DuPont model for each division. b. Calculate each division's residual income.
ABC Company operates two divisions with the following operating Information for the month of May. Division 1: sales, $148,000; operating Income, $49,580; operating assets, $370,000. Division 2: sales, $94,000; operating Income, $48,316; operating assets, $470,000. ABC Company expects a minimum return of 10% should be earned from all Investments. Required: a. Prepare ABC Company's ROI analysis using the DuPont model for each division. b. Calculate each division's residual income.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing
Section: Chapter Questions
Problem 1CE: Forchen, Inc., provided the following information for two of its divisions for last year: Required:...
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Transcribed Image Text:ABC Company operates two divisions with the following operating Information for the month of May.
Division 1: sales, $148,000; operating Income, $49,580; operating assets, $370,000.
Division 2: sales, $94,000; operating Income, $48,316; operating assets, $470,000.
ABC Company expects a minimum return of 10% should be earned from all investments.
Required:
a. Prepare ABC Company's ROI analysis using the DuPont model for each division.
b. Calculate each division's residual income.
Complete this question by entering your answers in the tabs below.
Required A
Required B
Prepare ABC Company's ROI analysis using the DuPont model for each division.
Note: Do not round intermediate calculations. Round Turnover answers to one decimal place. Round Margin and ROI answers
to the nearest whole percentage.
DuPont Performance Analysis:
Revenues
Operating Income
Operating Assets
Margin
Turnover
ROI
Division 1
%6
turns
96
Division 2
%
turns
96
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