Batman Abstract Company has three divisions that operate autonomously. Their results for 2015 are as follows:
The company's desired rate of return is 20%.
Required:
a.Compute each division's ROI.
b.Compute each division's residual income.
c.Rank each division by both ROI and residual income.
d.Which division had the best performance in 2015? Why?
Definitions:
Average Variable Cost
The total variable cost divided by the quantity of output, representing the variable cost per unit of output produced.
Marginal Cost
The expenditure involved in creating an additional product unit.
Total Variable Cost
The sum of all costs that vary with the level of output, including costs like raw materials and direct labor.
Average Total Cost
The total cost of production (fixed plus variable costs) divided by the quantity of output, representing the cost per unit including all expenses.
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