A divisional manager receives a bonus based on 8.0% of residual income from the division. During the current year, the division reported revenues of $2,000,000. The division has a variable cost ratio of 40%, operating leverage of 3.0 and asset turnover of 1.0. The required rate of return for the division is 15%.
Summary: This question belongs to management accounting and discusses about a company’s divisional manager residual income and to compute the amount of the bonus for the manager.
Total word count: 81
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