1. Riscalla Company has two divisions, A and B. The following information is available:

Division A
Revenue: $300,000
Income: $30,000
Invested capital: $100,000
Cost of capital: 20%

Division B
Revenue: $350,000
Income: $90,000
Invested capital: $150,000
Cost of capital: 15%

Calculate the residual income for each Division.

2. Division E had an ROI last year of 15%. The division's minimum required rate of return is 10%. If the division's invested capital last year was $450,000, what was the division's residual income last year?

3. The following data is available for the North Division of Blueride Products, Inc., and the single product it makes:

Unit selling price: $20
Variable cost per unit: $12
Annual fixed costs $280,000
Invested capital: $1,500,000

a. How many units must South sell each year to have an ROI of 16%?
b. If South wants a residual income of $50,000, and the minimum required rate of return is 10%, what is the capital turnover?

4. Sales and invested capital for Division 1 and Division 2 are given below:

What is the return on sales that each division will have to earn in order to generate a return on investment of 20%?

Solution Preview

1. Riscalla Company has two divisions, A and B. The following information is available:

Division A
Revenue: $300,000
Income: $30,000
Invested capital: $100,000
Cost of capital: 20%

Division B
Revenue: $350,000
Income: $90,000
Invested capital: $150,000
Cost of capital: 15%

Calculate the residual income for each Division.

Residual Income= Income- Cost of Capital*Invested Capital
Division A
30000-20%*100000
=$10000
Division B
90000-15%*150000
=$67500

2. Division E had an ROI last year of 15%. The division's minimum required rate of return is 10%. If the division's invested capital last year was $450,000, ...

Solution Summary

This provides the steps to calculate the return on sales that each division will have to earn in order to generate a return on investment

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Need help in solving these problems:
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7-51
Target costing: return on sales
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Return times investment or
Profit times operating assets or
Return on sales (ROS) times asset turnover or
Return on assets (ROA) times asset turnover or
Margin on sales (MS) times return on assets

Please help wth the following:
Felton Beverages maintains a profit margin of 4 percent and a sales-to-assets ratio of 3.
A. What is its return on assets?
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Thank you for your assistan

Measure of the manager's ability to produce increased sales from a given level of investment is?
Net book value.
Return on equity.
Return on investment.
Return on sales.
Asset turnover.