Attley Inc The Company Has Recently Implemented a New Performance Evaluation System

question 50

Multiple Choice

Attley Inc.has three separate divisions: Division A,Division B,and Division C.Information about the three divisions follows:
$\begin{array}{lccc} & \text { Division A } & \text { Division B } & \text { Division C } \\ \text { Operating income } & \$ 26,750 & \$ 121,000 & \$ 22,400 \\\text { Average operating assets } & \$ 250,000 & \$ 412,000 & \$ 83,000\end{array}$
The company has recently implemented a new performance evaluation system.Based on this new system,a division manager would only receive a bonus if the ROI of the division was greater than 25% and residual income was in excess of $20,000.If management uses a cost of capital rate of 18%,which division manager(s) would be eligible for a bonus?

• A)Division A and Division B.
• B)Division B and Division C.
• C)Division A only.
• D)Division B only.
• E)None of the answer choices is correct.

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