Household Brands Incorporated (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 2022, 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 2020 $ 24,500 $ 2,300 $ 10,000 2021 22,500 1,900 10,000 2022 19,600 1,800 9,500 Household 2020 17,400 1,300 7,500 2021 15,300 1,100 8,000 2022 12,500 900 6,500 Electronics 2020 13,500 1,500 4,500 2021 9,500 1,100 4,500 2022 8,700 1,050 4,300 Household Brands Total 2020 55,400 5,100 22,000 2021 47,300 4,100 22,500 2022 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. The total amount of the bonus pool for 2020 is: Multiple Choice $218,000. $141,000. $174,000. $360,000.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Household Brands Incorporated (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 2022, 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
2020	$ 24,500	$ 2,300	$ 10,000
2021	22,500	1,900	10,000
2022	19,600	1,800	9,500
Household
2020	17,400	1,300	7,500
2021	15,300	1,100	8,000
2022	12,500	900	6,500
Electronics
2020	13,500	1,500	4,500
2021	9,500	1,100	4,500
2022	8,700	1,050	4,300
Household Brands Total
2020	55,400	5,100	22,000
2021	47,300	4,100	22,500
2022	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.

The total amount of the bonus pool for 2020 is:

Multiple Choice

$218,000.
$141,000.
$174,000.
$360,000.

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