Big Sky Industries Is a Division of a Major Corporation

Essay

Big Sky Industries is a division of a major corporation. The following data are for the latest year of operations:
$$\begin{array} { l r } \text { Sales } & \$ 12,700,000 \\\text { Net operating income } & \$ 1,054,100 \\\text { Average operating assets } & \$ 5,000,000\\\text { The company's minimum required rate of return }&16\%\end{array}$$

Required:
a. What is the division's return on investment (ROI)?
b. What is the division's residual income?