Colonial Pharmaceuticals is a small firm specializing in new products. It is organized into two...
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Accounting
Colonial Pharmaceuticals is a small firm specializing in new products. It is organized into two divisions, which are based on the products they produce. AC Division is smaller and the life of the products it produces tend to be shorter than those produced by the larger SO Division. Selected financial data for the past year is shown below. Divisional investment is as of the beginning of the year. Colonial Pharmaceuticals uses a 10 percent cost of capital and uses beginning-of-the-year investment when computing ROI and residual income. Ignore income taxes.
AC Division
SO Division
Allocated corp. overhead
$
620
$
1,600
Cost of goods sold
3,240
6,600
Divisional investment
9,400
78,000
R&D
2,200
3,400
Sales
8,800
18,000
SG&A
760
1,330
Calculate ROI for the two divisions. (Enter your answers as a percentage rounded to 2 decimal places (i.e., 32.16).)
Compute residual income for the two divisions. (Negative amounts should be indicated by a minus sign.)
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