Essay
Two divisions of Interspatial Company report summary results as follows:
Pluto Mars
Sales $800,000 $900,000
Operating income $100,000 $150,000
Average investment $200,000 $400,000
a)Calculate the return on investment for each division and then break it down into the return on sales and investment turnover.
b)What is the residual income for each division if the required rate of return is 20%?
Correct Answer:
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a)ROI Pluto = $100,000/$200,000 = 50%
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