The Following Information Is Available About the Status and Operations

question 133

Essay

The following information is available about the status and operations for Division A of Triplex Company, which has a minimum required ROI of 10%. Answer each item independently of the others.
$$\begin{array} { l r } & \text { Division A } \\\text { Divisional investment } & \$ 100,006 \\\text { Divisional profit } & \$ 17,500 \\\text { Divisional sales } & \$ 200,000\end{array}$$
Required:
a. Compute the residual income for Division A.
b. Division A could increase its profit by $4,000 by increasing its investment by $30,000. Compute its new residual income.
c. Division A could increase its profit margin ratio by one percentage point (for example: from 12% to 13%), without increasing total sales or investment. Compute its new residual income.
d. Division A could reduce its investment so that its asset turnover increased by one time, while holding total sales and profit constant. Compute its new residual income.

---

Definitions:

Perishable

Refers to goods that have a limited lifespan or durability and therefore need to be consumed or used within a certain period before they deteriorate.

Common Standard

A uniform criterion or benchmark that can be widely used across different systems, organizations, or industries to ensure compatibility and efficiency.

Management Duties

Encompasses a range of responsibilities held by managers, including planning, organizing, leading, and controlling resources to achieve organizational objectives.

Corrective Action

Measures taken to rectify a problem, error, or deviation from a desired standard or performance.