The Tea Division of Canadian Products Is Planning the Operating

question 98

Essay

The Tea Division of Canadian Products is planning the operating budget for next year.Average total assets of $1,700,000 will be used during the year and unit selling prices are expected to average $250 each.Variable costs of the division are budgeted at $600,000 while fixed costs are set at $450,000.The company's required rate of return is 10%.Required:
a.Compute the volume necessary to achieve a 15% ROI.
b.The division manager receives a bonus of 50% of the residual income.What is his anticipated bonus for next year assuming he achieves the targeted operating income in part a.and the required return is based on 10%?

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Urban College

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