Craylon Corp. is planning the 2018 operating budget. Average operating assets of $1,800,000 will be used during the year and unit selling prices are expected to average $100 each. Variable costs of the division are budgeted at $500,000, while fixed costs are set at $300,000. The company's required rate of return is 18%.
Required:
a.Compute the sales volume necessary to achieve a 20% ROI.
b.The division manager receives a bonus of 50% of residual income. What is his anticipated bonus for 2015, assuming he achieves the 20% ROI from part (a)?

Question

Quizplus · Accepted Answer

The Answer of Craylon Corp. is planning the 2018 operating budget. Average operating assets of $1,800,000 will be used during the year and unit selling prices are expected to average $100 each. Variable costs of the division are budgeted at $500,000, while fixed costs are set at $300,000. The company's required rate of return is 18%.
Required:
a.Compute the sales volume necessary to achieve a 20% ROI.
b.The division manager receives a bonus of 50% of residual income. What is his anticipated bonus for 2015, assuming he achieves the 20% ROI from part (a)?