Refer to the data for problem regarding Long Beach Pharmaceutical Company. Required: Compute each divisions residual income

Question:

Refer to the data for problem regarding Long Beach Pharmaceutical Company.

Division II Division I $ 900,000. $ 200,000 $1,000,000 20% Income Average invested capital . $6,000,000 15% ROI

Required:

Compute each division’s residual income for the year under each of the following assumptions about the firm’s cost of acquiring capital.

1. 12 percent.

2. 15 percent.

3. 18 percent.

Which division was more successful? Explain your answer.

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Managerial Accounting

ISBN: 9780073022857

7th Edition

Authors: Ronald W Hilton

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Question Posted: Mar 12, 2013 03:29 AM

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Refer to the data for problem regarding Long Beach Pharmaceutical Company. Required: Compute each divisions residual income

Question:

Division II Division I $ 900,000. $ 200,000 $1,000,000 20% Income Average invested capital . $6,000,000 15% ROI

Step by Step Answer:

1 Imputed interest rate of 12 Division I Division II Divisional profit 900000 200000 Less Imputed in...View the full answer

Managerial Accounting

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