Zachs​, a national manufacturer of​ lawn-mowing and​ snow-blowing equipment, segments its business according to customer​ type: professional and residential. The following divisional information was available for the past​ year: 1​(Click the icon to view the​ information.)   Calculate each​ division's RI. Interpret your results.   ​First, select the formula to calculate residual income​ (RI).     (1)   – ( (2)   × (3)   ) = RI

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Zachs​,
a national manufacturer of​ lawn-mowing and​ snow-blowing equipment, segments its business according to customer​ type: professional and residential. The following divisional information was available for the past​ year:
1​(Click
the icon to view the​ information.)
 
Calculate each​ division's RI. Interpret your results.
 
​First, select the formula to calculate residual income​ (RI).
 
 
(1)  
(
(2)  
×
(3)  
)
=
RI
 
The residential division's RI is
 
.
The professional division's RI is
 
.
(4) 
 
 
exceeding​ management's expectations.
1: Data Table
 
Net Sales Revenue
Operating Income
Average Total Assets
Residential
$570,000
$64,600
$190,000
Professional
1,090,000
164,000
400,000
 
Management has a
27​%
target rate of return for each division.
(1) 
 
 
 
Asset turnover ratio
 
Average total assets
 
Net sales revenue
 
Operating income
 
Target rate of return
(2) 
 
 
 
Asset turnover ratio
 
Average total assets
 
Net sales revenue
 
Operating income
 
Target rate of return
(3) 
 
 
 
Asset turnover ratio
 
Average total assets
 
Net sales revenue
 
Operating income
 
Target rate of return
(4) 
 
 Both divisions are
 
 Neither division is
 
 Only the professional division is
 
 Only the residential division is
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