Question - The following information is available about the status and operations for Department G of Honda Com-pany, which has a minimum required ROI of 20%. Answer each item independently of the others.
Results Division G
Divisional investment $1,500,000
Divisional profit $550,000
Divisional sales $3,600,000
Requirements:
Compute the residual income for Dept. G
Dept. G could increase its profit by $25,000 by increasing its investment by $100,000. Compute its new residual income.
Dept. G could increase its profit margin ratio by one percentage point (for example: from 13% to 14%), without increasing total sales or investment. Compute its new residual income.
Dept. G could reduce its investment so that its asset turnover in-creased by one time, while holding total sales and profit constant. Compute its new residual income.