3. If management desires a minimum acceptable return on investment of 10%, determine the residual income for each division. Divisional Performance Analysis and EvaluationThe vice president of operations of Recycling Industries is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed incomestatement data for the past year for each division are as follows:Business DivisionConsumer DivisionSales$42,800,000$56,000,000Cost of goods sold23,500,00030,500,000Operating expenses11,424,80014,300,000Invested assets34,240,00070,000,000 3. If management desires a minimum acceptable return on investment of 10%, determine the residual income for each division.Residual IncomeBusiness DivisionConsumer Division

Answered: Business Division Consumer Division…

Business Division Consumer Division Sales $42,800,000 $56,000,000 Cost of goods sold 23,500,000 30,500,000 Operating expenses 11,424,800 14,300,000 Invested assets 34,240,000 70,000,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

3. If management desires a minimum acceptable return on investment of 10%, determine the residual income for each division.

Divisional Performance Analysis and Evaluation
The vice president of operations of Recycling Industries is evaluating the performance of two divisions organized as investment centers. Invested assets and condensed income
statement data for the past year for each division are as follows:
Business Division
Consumer Division
Sales
$42,800,000
$56,000,000
Cost of goods sold
23,500,000
30,500,000
Operating expenses
11,424,800
14,300,000
Invested assets
34,240,000
70,000,000

Formula Formula ROI (%) = Net Income Principal Amount × 100

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