Swiss Cleaning Manufacturing ROI residual income divisions
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26. THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 26 THROUGH 28. The Swiss Cleaning Manufacturing Company, Inc. manufactures home cleaning products. The company has two divisions, Bleach and Cleanser. Because of different accounting methods and inflation rates, the company is considering multiple evaluation measures. The following information is provided for 2009:
Bleach Division Cleanser Division
ASSETS:
Book Value $225,000 $450,000
Current Value $300,000 $250,000
INCOME:
Book Value $150,000 $100,000
Current Value $155,000 $105,000
The company is currently using a 15% required rate of return.
What are Bleach and Cleanser's respective return on investment based on book value?
a 0.22 and 0.67
b 0.42 and 0.52
c 0.52 and 0.42
d 0.67 and 0.22
27. What are Bleach and Cleanser's respective return on investment based on current values?
a 0.22 amd 0.67
b 0.42 and 0.52
c 0.52 and 0.42
d 0.67 and 0.22
28. What are Bleach and Cleanser's residual incomes based on book values, respectively?
a $116,250 and $32,500
b $110,000 and $67,500
c $67,500 and $110,000
d $37,500 and $116,250
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