The Tandem Division of the Great Adventures Cycles Company Had

question 97

Multiple Choice

The Tandem division of the Great Adventures Cycles Company had the following results last year (in thousands) . $$\begin{array} { | l | r r | } \hline \text { Sales } & \$ & 4,000,000 \\\hline \text { Operating incare } & \$ & 480,000 \\\hline \text { Total assets } & \$ & 2,000,000 \\\hline \text { Current liabilities } & \$ & 300,000 \\\hline\end{array}$$ Management's target rate of return is 10% and the weighted average cost of capital is 8%.Its effective tax rate is 40%.
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What is the Tandem division's Residual Income (RI) ?

• A)$ 152,000
• B)$ 280,000
• C)$ 320,000
• D)$8,000,000

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Definitions:

Operator Training

The process of teaching operators to run machinery or systems efficiently and safely.

Maintenance

The activities undertaken to keep an asset in working condition or restore it to proper condition.

Number Of Calls

Represents the total amount of telephone calls made or received by a person or organization within a specific period.

Number Of Operators

The total count of individuals or machines operating within a given process or system at a specific time.