Question

AdrenalineAdrenaline

Sports Company makes​ snowboards, downhill​ skis, cross-country​ skis, skateboards,​ surfboards, and​ in-line skates. The company has found it beneficial to split operations into two divisions based on the climate required for the​ sport: Snow Sports and​ Non-Snow Sports. The following divisional information is available for the past​ year:

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Compute each​ division's residual income. Interpret your results. Are your results consistent with each​ division's ROI?

First enter the​ formula, then calculate each divisions residual income.

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(

x

) =

Residual income

  
Sales
Operating Income
Total Assets
Current Liabilities
ROI
Snow Sports
$5,500,000
$1,045,000
$4,900,000
$440,000
21.3%
Non-Snow Sports
$8,600,000
$1,634,000
$6,800,000
$665,000
24.0%

AdrenalineAdrenaline​'s management has specified a target 16​% rate of return.

Answer 1