The Midwest Division of Grainger Company has average assets of $200,000 and income of $40,000. What is the return on investment for this division?

 The Midwest Division of Grainger Company has average assets of $200,000 and income of $40,000. What is the return on investment for this division?

multiple choice
500%
20% Correct
25%
80%

Explanation 
Return on investment = Income of $40,000 ÷ average assets of $200,000 = 20%.

 

Skilling Incorporated has the following information on one of its investment center departments. Sales: $9,800,000; income: $766,500; and investment center assets: $3,650,000. Management has set a target income of 11.5% of investment center assets. What is the department's residual income?

multiple choice
$346,750 Correct
21%
($360,500)
$419,750

Explanation
Residual income = Income of $766,500 − Target income of $419,750 (Average assets of $3,650,000 × 11.5%) = $346,750.