The following information is available about the status and operations for Division B of Bentley Company, which has a minimum required ROI of 20%. Answer each item independently of the others.
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Results
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Division B
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Divisional investment
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$1,500,000
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Divisional profit
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$550,000
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Divisional sales
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$3,600,000
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Requirements:
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Compute the residual income for Division B
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Division B could increase its profit by $25,000 by increasing its investment by $100,000. Compute its new residual income
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Division B 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.
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Division B could reduce its investment so that its asset turnover increased by one time, while holding total sales and profit constant. Compute its new residual income.
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