Assume that a division of MN Company has a 10% return on sales, income of $10,000,...
Assume that a division of MN Company has a 10% return on sales, income of $10,000, and an investment turnover of 4 times, divisional investment is 1. $10,000
2. $25,000
3. $40,000
4. $100,000
Assume a company purchased a machine for $10,000 and the useful life of the machine is four years. The investment generates a net income (income after depreciation, interest and taxes) of $6,500. Using average divisional investment, the residual divisional income (RDI) =
| 1. |
1.00 |
|
| 2. |
1.15 |
|
| 3. |
1.25 |
|
| 4. |
1.30 |
Homework Answers
Answer To First Question Is :Option 2.$25000.
Explanation : Given That division of MN Company has a 10% return on sales
income of $10,000.
Return/Sales = 10%
$10,000/Sales = 10%
Sales = $10,000/10%
Sales = $1,00,000.
investment turnover of 4 times That is
Turnover/Investment = 4
$1,00,000/Investment = 4
There Fore , Investment = $1,00,000/4
=$ 25,000
So, divisional investment is $25,000.
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