The Coffee Division of Canadian Products Is Planning the 2011

Essay

The Coffee Division of Canadian Products is planning the 2011 operating budget. 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 percent.
Required:
a. Compute the volume necessary to achieve a 20 percent ROI.
b. The division manager receives a bonus of 50 percent of the residual income. What is his anticipated bonus for 2011 assuming he achieves the targeted operating income in part a. and the required return is based on 18%?