The Sales, Income from Operations, and Invested Assets for Each

Essay

The sales, income from operations, and invested assets for each division of Salem Company are as follows:
$\begin{array}{llll}\text { Invested}&\text { Income from}\\\text { Asssets } & \text { Operations } & \text { Sales } & \\\$ 3,500,000 & \$ 410,000 & \$ 4,000,000 & \text { Division C} \\4,000,000 & 600,000 & 3,500,000 & \text { Division D} \\7,000,000 & 780,000 & 2,250,000 & \text { Division E}\end{array}$
Management has established a minimum rate of return for invested assets of 11%.
(a)Determine the residual income for each division.
(b)Bassed on residual income, which division is the most profitable?