Household Brands Inc. (HBI) manufactures household goods in the United States. The company made two acquisitions in previous years to diversify their product lines. In 2011, HBI acquired cosmetics and consumer electronics companies. HBI is now, in 2020, comprised of three divisions: cosmetics, household, and consumer electronics. The following information (in thousands of dollars) presents operating revenues, operating income, and invested assets of the company over the last three years: Revenue Operating Income Assets Cosmetics 2018 $ 24,500 $ 2,300 $ 10,000 2019 22,500 1,900 10,000 2020 19,600 1,800 9,500 Household 2018 17,400 1,300 7,500 2019 15,300 1,100 8,000 2020 12,500 900 6,500 Electronics 2018 13,500 1,500 4,500 2019 9,500 1,100 4,500 2020 8,700 1,050 4,300 Household Brands Total 2018 55,400 5,100 22,000 2019 47,300 4,100 22,500 2020 40,800 3,750 20,300 The current compensation package is an annual bonus award. The senior executives share in the bonus pool. The pool is calculated as 20% of the annual residual income of the company. The residual income is defined as operating income minus a cost of capital charge of 15% of invested assets. Round all calculations to two significant digits. The total amount of the bonus pool for 2020 is: Multiple Choice

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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Household Brands Inc. (HBI) manufactures household goods in the United States. The company made two acquisitions in previous years to diversify their product lines. In 2011, HBI acquired cosmetics and consumer electronics companies. HBI is now, in 2020, comprised of three divisions: cosmetics, household, and consumer electronics. The following information (in thousands of dollars) presents operating revenues, operating income, and invested assets of the company over the last three years:

	Revenue		Operating Income	Assets
Cosmetics
2018	$	24,500		$	2,300	$	10,000
2019		22,500			1,900		10,000
2020		19,600			1,800		9,500
Household
2018		17,400			1,300		7,500
2019		15,300			1,100		8,000
2020		12,500			900		6,500
Electronics
2018		13,500			1,500		4,500
2019		9,500			1,100		4,500
2020		8,700			1,050		4,300
Household Brands Total
2018		55,400			5,100		22,000
2019		47,300			4,100		22,500
2020		40,800			3,750		20,300

The current compensation package is an annual bonus award. The senior executives share in the bonus pool. The pool is calculated as 20% of the annual residual income of the company. The residual income is defined as operating income minus a cost of capital charge of 15% of invested assets. Round all calculations to two significant digits.

The total amount of the bonus pool for 2020 is:

Multiple Choice

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