This question has multiple parts.

part one

Array Company has provided the following Year 2 data.

Budget
Sales	$	514,000
Variable product costs		186,000
Variable selling expense		43,000
Other variable expenses		2,700
Fixed product costs		16,100
Fixed selling expense		24,000
Other fixed expenses		2,000
Interest expense		650
Variances
Sales		7,800	U
Variable product costs		4,200	F
Variable selling expense		2,000	U
Other variable expenses		1,100	U
Fixed product costs		290	F
Fixed selling expense		430	F
Other fixed expenses		190	U
Interest expense		110	F

Required

1. a. & b. Prepare in good form a budgeted and actual income statement for internal use. Separate operating income from net income in the statements.

part b

Array Company calculated its return on investment as 10 percent. Sales are now $340,000, and the amount of total operating assets is $360,000. Required

1. If expenses are reduced by $30,600 and sales remain unchanged, what return on investment will result? (Round your answer to 2 decimal places. (i.e., 0.2345 should be entered as 23.45).)

2. If both sales and expenses cannot be changed, what change in the amount of operating assets is required to achieve the same result? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)

part c

Array company operates two divisions. The following information pertains to each division for Year 1.

	Division A				Division B
Sales	$	217,000			$	77,000
Operating income	$	15,200			$	9,700
Average operating assets	$	60,000			$	43,000
Company's desired rate of return		10	%			10	%

Required

1. Compute each divisions residual income.

2. Which division increased the companys profitability more?

a.	division a	residual income for a:
	division b	residual income for b:
b.	The division that increased the companys profits more is

part d

Array Company earned operating income of $6,120,000 on operating assets of $60,000,000 during Year 2. The Tree Cutting Division earned $1,235,100 on operating assets of $6,900,000. Munoz has offered the Tree Cutting Division $2,190,000 of additional operating assets. The manager of the Tree Cutting Division believes he could use the additional assets to generate operating income amounting to $453,330. Munoz has a desired return on investment (ROI) of 8.20 percent. Required

1. Calculate the return on investment for Munoz, the Tree Cutting Division, and the additional investment opportunity.

2. Calculate the residual income for Munoz, the Tree Cutting Division, and the additional investment opportunity.