The Coffee Division of Canadian Products Is Planning the Operating

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%?