The Following Information Is Available About the Status and Operations

question 137

Essay

The following information is available about the status and operations for Division B of Abad Company, which has a minimum required ROI of 20%. Answer each item independently of the others.
$$\begin{array} { l r r } & \text { Division B } \\\text { Divisional investment } & \$ 750,000 \\\text { Divisional profit } & \$ 275,000 \\\text { Divisional sales } & \$ 1,800,000\end{array}$$
Required:
a. Compute the ROI for Division B.
b. Compute the residual income for Division B.
c. Division B could increase its profit by $10,000 by increasing its investment by $40,000. Compute its total residual income.
d. Division B could increase its profit margin ratio by one percentage point (for example: from 10% to 11%), without increasing total sales or investment. Compute its new ROI.
e. Division B could reduce its investment so that its asset turnover increased by one time, while holding total sales and profit constant. Compute its new ROI.

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Definitions:

Synaptic Pruning

The process of eliminating synaptic connections in the brain that are weak or unused to enhance neurological efficiency.

Neuronal Pruning

The process of eliminating unused or weaker neuronal connections in the brain to enhance the efficiency of neuronal transmissions.

Neurogenesis

The process by which new neurons are formed in the brain, which occurs throughout a person's life, particularly in the hippocampus and olfactory bulb.

Myelination

The process of forming a myelin sheath around the nerve fibers to increase the speed at which information travels through the nervous system.