Investment center analysis; ROI and residual income
Response to the following problem:
The Central Division of American, Inc., has operating income of $19,200 on sales revenue of $160,000. Divisional operating assets are $100,000, and management of American has determined that a minimum return of 16% should be expected from all investments.
Required:
a. Using the DuPont model, calculate The Central Division's margin, turnover, and ROI.
b. Calculate The Central Division's residual income.