The following information is available about the status and operations for Department G of Honda Company, which
Question:
The following information is available about the status and operations for Department G of Honda Company, which has a minimum required ROI of 20%. Answer each item independently of the others.
Results Division G
Divisional investment ........$1,500,000
Divisional profit ........... $550,000
Divisional sales ............$3,600,000
Requirements:
a. Compute the residual income for Dept. G
b. Dept. G could increase its profit by $25,000 by increasing its investment by $100,000. Compute its new residual income
c. Dept. G could increase its profit margin ratio by one percentage point (for example: from 13% to 14%), without increasing total sales or investment. Compute its new residual income.
d. Dept. G could reduce its investment so that its asset turnover in-creased by one time, while holding total sales and profit constant. Compute its new residual income.
Asset TurnoverAsset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio.
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 978-0133392883
6th Canadian edition
Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ