Alexander Bruce and Jonathon Wayne Are Managers of Two Product

question 13

Essay

Alexander Bruce and Jonathon Wayne are managers of two product lines for Gotham Incorporated.One of them is a candidate for promotion based on performance.Using the following data:
a.Calculate the residual income (assume a target income of 10% return on assets)and the investment center return on assets.
b.Indicate which manager should be recommended for promotion and why.
$\begin{array}{lrr}& \underline { \text { Bruce }} & \underline { \text { Wayne } } \\\text { Revenue } & \$ 205,000 & \$ 270,000 \\\text { Costs } & 189,000 & 232,000 \\\text { Average assets } & 300,000 & 290,000\end{array}$

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Definitions:

Receivables

Receivables are amounts owed to a company by its customers or debtors for goods or services delivered but not yet paid for.

Factoring

The financial transaction where a business sells its accounts receivable (invoices) to a third party (factor) at a discount, in order to raise immediate capital.

Note Maturity

Note maturity refers to the date on which a debt instrument, such as a bond or promissory note, reaches its due date and the principal is to be paid to investors.

Quarterly Interest

Interest calculated or paid every three months on loans, investments, or deposits.