Calculate each division residual income

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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.

Reference no: EM132815570

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