The Following Information Is Available About the Status and Operations

Essay

The following information is available about the status and operations for Division B of Abad Company, which has a minimum required ROI of 20%. Answer each item independently of the others.
$$\begin{array} { l r r } & \text { Division B } \\\text { Divisional investment } & \$ 750,000 \\\text { Divisional profit } & \$ 275,000 \\\text { Divisional sales } & \$ 1,800,000\end{array}$$
Required:
a. Compute the ROI for Division B.
b. Compute the residual income for Division B.
c. Division B could increase its profit by $10,000 by increasing its investment by $40,000. Compute its total residual income.
d. Division B could increase its profit margin ratio by one percentage point (for example: from 10% to 11%), without increasing total sales or investment. Compute its new ROI.
e. Division B could reduce its investment so that its asset turnover increased by one time, while holding total sales and profit constant. Compute its new ROI.