London Ltd. operates its two divisions as investment centers. Information about these divisions follows. a. What is
Question:
a. What is the residual income of each division if the "charge" on invested assets is 13 percent? Which division is doing a better job?
b. If the only change expected for next year is a sales increase of 20 percent, what will be the residual income of each division? Which division will be doing a better job financially?
c. Why were the percentage changes in residual income determined in (b) so different for Divisions 1 and2?
Transcribed Image Text:
Sales Total variable costs Total fixed costs Average assets invested Division 1 $4,200,000 2,520,000 500,000 6,100,000 Division 2 $1,200,000 300,000 700,000 1,100,000
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a Division 1 Division 2 Sales 4200000 1200000 Variable costs 2520000 300000 Fixed costs 500000 70000...View the full answer
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Related Book For
Cost Accounting Foundations and Evolutions
ISBN: 978-1111626822
8th Edition
Authors: Michael R. Kinney, Cecily A. Raiborn
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