Response to the following :
Based on the data in Exercise , assume that management has established a 10% minimum acceptable rate of return for invested assets.
a. Determine the residual income for each division.
b. Which division has the most residual income?
Exercise :
The income from operations and the amount of invested assets in each division of Gantt Industries are as follows:
|
|
Income from Operations
|
Invested Assets
|
|
Sporting Goods Division
|
$270,000
|
$1,500,000
|
|
Health Club Division
|
220,000
|
1,100,000
|
|
School Division
|
227,500
|
1,750,000
|
a. Compute the rate of return on investment for each division.
b. Which division is the most profitable per dollar invested?