Essay
The Coffee Division of Canadian Products is planning the operating budget for next year. Average total assets of $1,500,000 will be used during the year and unit selling prices are expected to average $100 each. Variable costs of the division are budgeted at $400,000 while fixed costs are set at $250,000. The company's required rate of return is 18%.
Required:
a. Compute the volume necessary to achieve a 20% ROI.
b. The division manager receives a bonus of 50% of the residual income. What is his anticipated bonus for next year assuming he achieves the targeted operating income in part a. and the required return is based on 18%?
Correct Answer:
Verified
Correct Answer:
Verified
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