Reference no: EM132815570
Problem - ABC Company operates two divisions with the following operating information for the month of May:
Division 1: sales, $200,000; operating income, $80,000; operating assets, $500,000.
Division 2: sales, $120,000; operating income, $64,800; operating assets, $600,000.
ABC Company expects a minimum return of 10% should be earned from all investments.
Required -
a. Prepare ABC Company's ROI analysis using the DuPont model for each division.
b. Calculate each division's residual income.