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What is his anticipated bonus

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Reference no: EM133033559

Problem - The Division A of Standard Products is planning its 2022 operating budget. Average operating assets (invested capital) of $1,500,000 will be used in the division during the year. Selling price per-unit is expected to average $100. Budgeted variable costs of the division are $400,000, while fixed costs are set at $250,000. The company's required rate of return for purposes of calculating residual income (RI) is 18%.

Required -

1. Compute the sales volume (in units) necessary for Division A to achieve a 20% ROI in 2022.

2. The division manager receives a bonus of 50% of residual income (RI). What is his anticipated bonus for 2022 for the division manager, assuming she achieves the 20% ROI target specified in part (1)?

Reference no: EM133033559

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