Thompson Ltd.has a division that generated $5 000 000 in sales and operating income of $1 000 000 on average operating assets of $2 800 000.The company's management team expects division managers to generate sufficient income to guarantee a minimum return of 15 per cent.
Required:
A. What is the division's residual income?
B. What is the division's return on investment (ROI)?

Question

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The Answer of Thompson Ltd.has a division that generated $5 000 000 in sales and operating income of $1 000 000 on average operating assets of $2 800 000.The company's management team expects division managers to generate sufficient income to guarantee a minimum return of 15 per cent.
Required:
A. What is the division's residual income?
B. What is the division's return on investment (ROI)?