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[answered] Bookmark The manager of Healthy Snack Division of Mulchan I


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The manager of Healthy Snack Division of Mulchan Industries is evaluated on her division's return on investment and residual income. The company requires that all divisions generate a minimum return on invested assets of 8 percent. Consistent failure to achieve this minimum target is grounds for the dismissal of a division manager. The annual cash bonus paid to division managers is 1 percent of residual income in excess of $100,000. The Snack Division's operating margin for the year was $8,687,000, during which time its average invested capital was $61,875,000.

a.

Compute the Snack Division's return on investment and residual income. (Round ROI answer to 2 decimal places. Omit the "$" & "%" signs in your response.)

??Return on investment %
??Residual income $


b.

Will the manager of the Snack Division receive a bonus for her performance? If so, how much will it be?(Round your answer to nearest dollar amount. Omit the "$" sign in your response.)

??Manager's bonus $ ??


c.

In reporting her investment center?s performance for the past 10 years, the manager of the Snack Division accounted for the depreciation of her division?s assets by using an accelerated depreciation method allowed for tax purposes. As a result, virtually all of the assets under her control are fully depreciated. Given that the company?s other division managers use straight-line depreciation, is her use of an accelerated method ethical? Defend your answer.

The use of


will increase the division manager's current ROI and RIfor two reasons: 1) her operating earnings margin will as annual depreciation expense decreases, and 2) theaverage asset base of her investment center will

as its assets become fully depreciated. Thus, the use of accelerated depreciation over time will inflate her division's ROI and RI. Given that her bonus is based on RI, she will receive a larger bonus using accelerated depreciation than she would using the straight-line depreciation method.

with explanation please


The manager of Healthy Snack Division of Mulchan Industries is evaluated on her division's return on

 

investment and residual income. The company requires that all divisions generate a minimum...

 


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