The following information is available about the status and operations of the Ma

Question

The following information is available about the status and operations of the Manufacturing Division of Taylor Company, which has a hurdle rate of 4%. Divisional identifiable average assets Divisional income from operations Divisional sales revenue $413,822 S 17,924 $ 366,815 a. Compute the ROl for the Manufacturing Division. (Round your answer to 1 decimal place.) eturn on nvestment b. Break the Manufacturing Division ROl down using the DuPont formula. (Round your answers to 2 decimal places.) Manufacturing Division ROl Profit Margin Investment Turnover c. Compute the residual income for the Manufacturing Division. (Round your answer to the nearest dollar amount.) Residual Income

Explanation / Answer

a.ROI=Income from operations/Average assets

=(17924/413822)=4.3%

b.Profit margin=Income from operations/Sales

=(17924/366815)=4.89%

Investment turnover=Sales/Average assets

=(366815/413822)=0.89

c.Residual income=Income from operations-(Average assets*Hurdle rate)

=17924-(413822*4%)=$1371(Approx).

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