Please see complete question below :
CPA-08299: Managers of the Doggie Food Co. want to add a bonus component to their compensation plan. They are trying to decide between return on investment (ROI) and residual income (RI) as the performance measure they will use. If Doggie adopts the RI performance measure, the relevant required rate of return would be 18%. One segment of Doggie is the Good Treats division, where the manager has invested in new equipment. The operating results from this equipment are as follows:
Revenues $ 80,000
Cost of goods sold 45,000
General and administrative expenses 15,000
Assuming that there are no income taxes, what would be the ROI and RI for this equipment that has an average value of $100,000?
ROI RI
Answer:
ROI = 20% and RI = $2000
Explanation:
Return On Investment(ROI) = Profit before Interest & Tax/Average Investment
Profit before Interest & Tax (PBIT) = Revenue -cost of goods sold- General & Adm expenses
PBIT= $ 80,000
- $45,000
-$15,000
= $20,000
ROI = ($20,000/100,000) * 100% = 20%
Residual Income = PBIT - (Average Investment* Required Rate of Return)
=$20,000- (18%* 100,000)
=$20,000- $18,000
= $2000
Usually it is done on a monthly payment, so I would say it is C. Monthly
Answer: True.
Explanation:
With the rise in the use of email to communicate during a business transaction, the hard-copy message still has a higher value than the emails: this is because hard copy messages can easily be kept for reference purposes and also they most times bear the stamp and signature of the person(s) transacting the business.
Purchase of services mean a person did a job for him, not that he bought a product. The answer cannot include C, D, E since those all are purchasing of products.
Therefore the answer is the first one, A B F.
