Big Sky Industries is a division of a major corporation. The following data are for the latest year of operations:
$$\begin{array} { l r }
\text { Sales } & \$ 12,700,000 \
\text { Net operating income } & \$ 1,054,100 \
\text { Average operating assets } & \$ 5,000,000\
\text { The company's minimum required rate of return }&16\%
\end{array}$$

Required:
a. What is the division's return on investment (ROI)?
b. What is the division's residual income?

Question

Big Sky Industries is a division of a major corporation. The following data are for the latest year of operations:
 $$\begin{array} { l r } 
\text { Sales } & \$ 12,700,000 \
\text { Net operating income } & \$ 1,054,100 \
\text { Average operating assets } & \$ 5,000,000\
\text { The company's minimum required rate of return }&16\%
\end{array}$$
 
Required:
a. What is the division's return on investment (ROI)?
b. What is the division's residual income?

Quizplus · Accepted Answer

The Answer of Big Sky Industries is a division of a major corporation. The following data are for the latest year of operations:
 $$\begin{array} { l r } 
\text { Sales } & \$ 12,700,000 \
\text { Net operating income } & \$ 1,054,100 \
\text { Average operating assets } & \$ 5,000,000\
\text { The company's minimum required rate of return }&16\%
\end{array}$$
 
Required:
a. What is the division's return on investment (ROI)?
b. What is the division's residual income?

Big Sky Industries Is a Division of a Major Corporation