The sales, income from operations, and invested assets for each division of Winston Company are as follows:
|
|
Sales
|
Income from
Operations
|
Invested
Assets
|
|
Division C
|
$5,000,000
|
$630,000
|
$3,900,000
|
|
Division D
|
6,800,000
|
760,000
|
4,300,000
|
|
Division E
|
3,750,000
|
750,000
|
7,250,000
|
|
|
|
|
Management has established a minimum rate of return for invested assets of 8%.
|
(a)
|
Determine the residual income for each division.
|
|
|
|
|
(b)
|
Based on residual income, which of the divisions is the most profitable?
|