Simple ROI and Residual Income Calculations. Consider the following data: 1.) DIVISION X Y Z Invested Capital P2,000,000 (1)1,300,000 P1,250,000 Income (2) 100,000 P182,000 P 150,000 Revenue P4,000,000 P3,640,000 (3) 3,750,000 Income Percentage of Revenue 2.5% (4) 5% (5) 4% Capital Turnover (6) 2 (7) 2.8 3 Rate of Return on Invested Capital (8) 5% 14% (9) 12% Required: 1. Which division is the best performer 2. Suppose each division is assessed an imputed interest rate of 20% on invested capital. Compute the residual income for each division.
Simple ROI and Residual Income Calculations. Consider the following data: 1.) DIVISION X Y Z Invested Capital P2,000,000 (1)1,300,000 P1,250,000 Income (2) 100,000 P182,000 P 150,000 Revenue P4,000,000 P3,640,000 (3) 3,750,000 Income Percentage of Revenue 2.5% (4) 5% (5) 4% Capital Turnover (6) 2 (7) 2.8 3 Rate of Return on Invested Capital (8) 5% 14% (9) 12% Required: 1. Which division is the best performer 2. Suppose each division is assessed an imputed interest rate of 20% on invested capital. Compute the residual income for each division.
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter14: Decentralized Operations
Section: Chapter Questions
Problem 14.16E
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1.) | DIVISION | ||||
X | Y | Z | |||
Invested Capital | P2,000,000 | (1)1,300,000 | P1,250,000 | ||
Income | (2) 100,000 | P182,000 | P 150,000 | ||
Revenue | P4,000,000 | P3,640,000 | (3) 3,750,000 | ||
Income Percentage of Revenue | 2.5% | (4) 5% | (5) 4% | ||
Capital Turnover | (6) 2 | (7) 2.8 | 3 | ||
(8) 5% | 14% | (9) 12% |
Required:
1. Which division is the best performer
2. Suppose each division is assessed an imputed interest rate of 20% on invested capital. Compute the residual income for each division.
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