Answer:
ROI 15%
Residual Income $1,350,000
Explanation:
Residual Income is the difference between net income of the company and the required rate of return. It determines the excess of income generate than the minimum return. The formula to calculate the residual income is,
RI = Net operating Income - (Required rate of return * Cost of operating assets)
RI = $4,500,000 - (21% * $15,000,000 )
RI = $1,350,000
ROI = 
Capital Employed = Sales - Average operating assets
ROI = 15%
Residual income is positive when the department has meet the minimum return requirement. Minimum return is the return that is required by the company stakeholders. The particular projects and activities are selected on the basis of residual income.
The law of diminishing returns states that if one input in the production of a product is increased while other inputs are fixed, a point will be reached where the addition of more of the input will result in a gradually smaller increase in output. Producers usually take into consideration the law of diminishing return; the law determines the quantity of product that a producer can manufacture and supply in order to make maximum profits.
<span>A nation seeking to escalate its overall productivity might
be best assisted by investing money into technology. Developments and advances
in technology which interprets into a more productive economic activity as
creation and delivery of goods and services are improved.</span>
<u>SOLUTION AND EXPLANANTION:</u>
Let us define :Protection period” = P = Reorder period + Lead time = 7 + 3 days = 10 days
Z value for service level of 99% as per Z table= 2.33
Demand during protection period = = D = 80
Standard deviation of demand during Protection period = Sd = 10
Safety stock during protection period =
<u>Therefore,
</u>
Gross quantity to be ordered = Demand during protection period + Safety stock during protection period = 80 +73.67 = 153.67
However, number of items already in hand = 30 units
<u>Hence,
</u>
Net quantity to be ordered = Gross quantity to be ordered – Number of items already in hand = 153.67 – 30 = 123.67 ( 124 rounded to nearest whole number)
Answer: Option a
Explanation: Payback period in capital budgeting comes from a time needed to recover or exceed the break-even point of the funds spent on a project. Moreover, the payback period does not take into account the time value of money.
It is based on the number of years it would take for the funds spent to be recovered. Thus, payback period only evaluates a project on the basis of time period it takes to recover back the investment this results in ignorance of cash flows, which might be huge in amount, that results after the pay back period.
