Question

Several items are missing from the following table of return on investment and residual income. Determine the missing items. Round percentages to one decimal place.

Division		Invested Assets		Operating Income		Return on Inv.	Min. ROI		Min. Amt. of Operating Income		Residual Income
East		$		$		%	16.0%		$128,000		$10,000
West		$850,000		$153,000		%	12.0%		$		$
North		$825,000		$		20.0%	%		$		$24,000
South		$		$129,000		24.0%	%		$60,000		$

Answer 1

Ans.	Division	Invested	Operating	Return on	Minimum	Min. Amt. of	Residual
		Assets	Income	Investment	ROI	Operating Income	Income
	East	$800,000	$138,000	17.3%	16.00%	$128,000	$10,000
	West	$850,000	$153,000	18.0%	12.00%	$102,000	$51,000
	North	$825,000	$165,000	20.00%	17.1%	$141,000	$24,000
	South	$537,500	$129,000	24.00%	11.2%	$60,000	$69,000
	*WORKING NOTES:
	A) Calculations of East Division:
	Invested assets = Minimum amount of operating income / Minimum ROI
		$128,000 / 16%
		$800,000
	Operating income = Minimum amount of operating income + Residual income
		$128,000 + $10,000
		$138,000
	Return on investment = Operating income / Invested assets
		$138,000 / $800,000 * 100
		17.3%
	B) Calculations of West Division:
	Return on investment = Operating income / Invested assets
		$153,000 / $850,000 * 100
		18.00%
	Minimum amount of operating income = Invested assets * Minimum ROI
		$850,000 * 12%
		$102,000
	Residual income =   Operating income - Minimum amount of operating income
		$153,000 - $102,000
		$51,000
	C) Calculations of North Division:
	Operating income = Invested assets * Return on investment
		$825,000 * 20%
		$165,000
	Minimum amount of operating income = Operating income - Residual income
		$165,000 - $24,000
		$141,000
	Minimum ROI =   Minimum amount of operating income / Invested assets * 100
		$141,000 / $825,000 * 100
		17.1%
	D) Calculations of South Division:
	Invested assets = Operating income / Return on investment
		$129,000 / 24%
		$537,500
	Minimum ROI =   Minimum amount of operating income / Invested assets * 100
		$60,000 / $537,500 * 100
		11.2%
	Residual income =   Operating income - Minimum amount of operating income
		$129,000 - $60,000
		$69,000