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The following information is available about the status and

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The following information is available about the status and operations for Division B of Bentley Company, which has a minimum required ROI of 20%. Answer each item independently of the others.

Results

Division B

Divisional investment

$1,500,000

Divisional profit

$550,000

Divisional sales

$3,600,000

Requirements:

Compute the residual income for Division B

Division B could increase its profit by $25,000 by increasing its investment by $100,000. Compute its new residual income

Division B could increase its profit margin ratio by one percentage point (for example: from 13% to 14%), without increasing total sales or investment. Compute its new residual income.

Division B could reduce its investment so that its asset turnover increased by one time, while holding total sales and profit constant. Compute its new residual income.

Reference no: EM13577294

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