The Following Information Is Available About the Status and Operations

question 37

Essay

The following information is available about the status and operations for Division B of Tallon Company, which has a minimum required ROI of 20%. Answer each item independently of the others.
$$\begin{array} { l r } & \text { Division B} \\\text { Divisional investment } & \$ 1,500,000 \\\text { Divisional profit } & \$ 550,000 \\\text { Divisional sales } & \$ 3,600,000\end{array}$$
Required:
a. Compute the residual income for Division B.
b. Division B could increase its profit by $25,000 by increasing its investment by $100,000. Compute its new residual income.
c. Division B could increase its profit margin ratio by one percentage point (for example: from 13% to 14%), without increasing total sales or investment. Compute its new residual income. (Round immediate calculations to three decimal places.)
d. 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 residual income.

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Definitions:

CITES

An international accord, the Convention on International Trade in Endangered Species of Wild Fauna and Flora, focuses on protecting wildlife species from extinction by regulating their trade across borders.

Illegal Wildlife Trade

The unlawful buying and selling of wildlife products or live animals, contributing to the endangerment and extinction of species globally.

Member Countries

Nations that are part of an international organization or agreement.

Tropical Forests

Tropical Forests are dense forests located in the equatorial zone, characterized by high biodiversity, a warm climate, and significant annual rainfall.