The Dessert Division of Incredible Edibles Corporation has the following segment information:

$\begin{array}{ll}
\text { Assets available for use } & \$ 1,800,00 \
\text {T arget rate of return } & 10 \%\\
\text { Residul income } &\$ 270.000\
\end{array}$

What was Dessert Division's return on investment?

Question

The Dessert Division of Incredible Edibles Corporation has the following segment information:

$\begin{array}{ll}
\text { Assets available for use } & \$ 1,800,00  \
\text {T arget rate of return } &  10 \%\\
\text { Residul income } &\$ 270.000\
\end{array}$

What was Dessert Division's return on investment?

Quizplus · Accepted Answer

To calculate the return on investment (ROI), we need to first calculate the division's operating income. Using the residual income formula, we can calculate the operating income as:

Operating income = Residual income + (Target rate of return x Assets available for use)
Operating income = 270,000 + (0.10 x 1,800,000)
Operating income = $450,000

Now, we can calculate the ROI as:

ROI = Operating income / Assets available for use
ROI = 450,000 / 1,800,000
ROI = 0.25 or 25%

Therefore, the Dessert Division's ROI is 25%, which makes choice C the correct answer.

The Dessert Division of Incredible Edibles Corporation Has the Following