ABC Company operates two divisions with the following operating information for the month of May: Division 1:
Question:
ABC Company operates two divisions with the following operating information for the month of May:
Division 1: sales, $240,000; operating income, $72,000; operating assets, $600,000.
Division 2: sales, $160,000; operating income, $80,000; operating assets, $800,000.
ABC Company expects a minimum return of 10% should be earned from all investments.
Required:
Prepare ABC Company’s ROI analysis using the DuPont model for each division, and calculate each division’s residual income.
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