Craylon Corp

question 146

Essay

Craylon Corp. is planning the 2018 operating budget. Average operating assets of $1,800,000 will be used during the year and unit selling prices are expected to average $100 each. Variable costs of the division are budgeted at $500,000, while fixed costs are set at $300,000. The company's required rate of return is 18%.
Required:
a.Compute the sales volume necessary to achieve a 20% ROI.
b.The division manager receives a bonus of 50% of residual income. What is his anticipated bonus for 2015, assuming he achieves the 20% ROI from part (a)?

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Definitions:

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