RI Carrington Co. operates its two divisions as investment centers. Information about these divisions follows. Division 1 Division 2 $3,120,000 $1,110,000 1,578,000 198,000 504,000 525,000 Sales Total variable costs Total fixed costs Average assets invested a. What is the residual income of each division if the "charge" on invested assets is 13 percent? RI 294,000 4,308,000 Division 1 $ Division 2 $ Which division is doing a better job? + b. If the only change expected for next year is a sales increase of 20 percent, what will be the residual income of each division? RI Division 1 $ Division 2 $ Which division is doing a better job?
RI Carrington Co. operates its two divisions as investment centers. Information about these divisions follows. Division 1 Division 2 $3,120,000 $1,110,000 1,578,000 198,000 504,000 525,000 Sales Total variable costs Total fixed costs Average assets invested a. What is the residual income of each division if the "charge" on invested assets is 13 percent? RI 294,000 4,308,000 Division 1 $ Division 2 $ Which division is doing a better job? + b. If the only change expected for next year is a sales increase of 20 percent, what will be the residual income of each division? RI Division 1 $ Division 2 $ Which division is doing a better job?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Carrington Co. operates its two divisions as investment centers. Information about these divisions follows.
Division 1 Division 2
$3,120,000 $1,110,000
1,578,000
198,000
504,000
525,000
Sales
Total variable costs
Total fixed costs
294,000
4,308,000
Average assets invested
a. What is the residual income of each division if the "charge" on invested assets is 13 percent?
RI
Division 1 $
Division 2 $
Which division is doing a better job?
+
b. If the only change expected for next year is a sales increase of 20 percent, what will be the residual income of each division?
RI
Division 1 $
Division 2 $
Which division is doing a better job?
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