Zachary Cough Drops operates two divisions. The following information pertains to each division for Year 1.
Division A
Division B
Sales
$
220,000
$
88,000
Operating income
$
16,500
$
9,000
Average operating assets
$
60,000
$
45,000
Company's desired rate of return
11
%
11
%
Required
Compute each division’s residual income.
Which division increased the company’s profitability more?