Answer:
The solution is given below
Step-by-step explanation:
The computation is shown below:
a. The profit margin is
= Operating income ÷ total sales
= $2,828,980 ÷ $23,380,000
= 12.1%
b. The investment turnover is
= Total sales ÷ total assets
= $23,380,000 ÷ $10,000,000
= 2.34
c. The return on investment is
= Profit margin × investment turnover
= 12.1% × 2.34
= 28.29%
d. The residual income is
= Operating income - (minimum rate of return × assets)
= $2,828,980 - (20% of $10,000,000)
= $828,980
