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 Tallon Company, which has a minimum required ROI of 20%. Answer each item independently of the others.
$$\begin{array} { l r } & \text { Division B} \\\text { Divisional investment } & \$ 1,500,000 \\\text { Divisional profit } & \$ 550,000 \\\text { Divisional sales } & \$ 3,600,000\end{array}$$
Required:
a. Compute the residual income for Division B.
b. Division B could increase its profit by $25,000 by increasing its investment by $100,000. Compute its new residual income.
c. Division B could increase its profit margin ratio by one percentage point (for example: from 13% to 14%), without increasing total sales or investment. Compute its new residual income. (Round immediate calculations to three decimal places.)
d. 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 residual income.