Household Brands Inc The Current Compensation Package Is an Annual Bonus Award

question 86

Multiple Choice

Household Brands Inc. (HBI) manufactures household goods in the United States. The company made two acquisitions in previous years to diversify their product lines. In 2011, HBI acquired cosmetics and consumer electronics companies. HBI is now, in 2020, comprised of three divisions: cosmetics, household, and consumer electronics. The following information (in thousands of dollars) presents operating revenues, operating income, and invested assets of the company over the last three years:
$\begin{array}{lrrr}&\text { Revenue } & \text { Operating Income } & \text { Assets } \\\text { Cosmetics } & & & \\2018 & \$ 24,500 & \$ 2,300 & \$ 10,000 \\2019 & 22,500 & 1,900 & 10,000 \\2020 & 19,600 & 1,800 & 9,500\\\text { Household } & & & \\2018 & 17,400 & 1,300 & 7,500 \\2019 & 15,300 & 1,100 & 8,000 \\2020 & 12,500 & 900 & 6,500\\\text { Electronics } & & & \\2018 & 13,500 & 1,500 & 4,500 \\2019 & 9,500 & 1,100 & 4,500 \\2020 & 8,700 & 1,050 & 4,300\\\text { Household Brands Total }\\2018 & 55,400 & 5,100 & 22,000 \\2019 & 47,300 & 4,100 & 22,500 \\2020 & 40,800 & 3,750 & 20,300\\\end{array}$
The current compensation package is an annual bonus award. The senior executives share in the bonus pool. The pool is calculated as 20% of the annual residual income of the company. The residual income is defined as operating income minus a cost of capital charge of 15% of invested assets. Round all calculations to two significant digits.
Asset turnover in the electronics division in 2020 is (rounded) :

• A)1.82
• B)2.02
• C).733
• D)2.31

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Definitions:

Transmission Mechanisms

The processes by which signals or forces are conveyed from one part to another, such as in the transmission of nerve impulses.

Genes

Segments of DNA located on chromosomes, that contain the instructions for the synthesis of proteins, influencing individual traits.

Hormones

Chemical messengers secreted by glands that regulate bodily processes and behaviors by acting on specific target cells.

Homeostasis

The balanced internal environment of the body; the automatic tendency of an organism to maintain such a steady state.