Colonial Pharmaceuticals is a small firm specializing in newproducts. It is organized into two divisions, which are based onthe products they produce. AC Division is smaller and the life ofthe products it produces tend to be shorter than those produced bythe larger SO Division. Selected financial data for the past yearis shown below. Divisional investment is as of the beginning of theyear. Colonial Pharmaceuticals uses a 9 percent cost of capital anduses beginning-of-the-year investment when computing ROI andresidual income. Ignore income taxes.

	AC Division	SO Division
Allocated corp. overhead	$	645		$	1,350
Cost of goods sold		3,290			6,100
Divisional investment		9,900			75,500
R&D		2,450			3,150
Sales		9,800			15,500
SG&A		835			1,080

Required:

a. Compute divisional income for the twodivisions.

division income

ac division

so division

b. Calculate the operating margin, which isequivalent to the return on sales, for the two divisions.(Enter your answers as a percentage rounded to 2 decimalplaces (i.e., 32.16).)

operating margin

AC division %

SQ divison %

c. Calculate ROI for the two divisions.(Enter your answers as a percentage rounded to 2 decimalplaces (i.e., 32.16).)

Roi

AC divison %

So divison %

d. Compute residual income for the twodivisions. (Negative amounts should be indicated by a minussign.)

residual income for ac division So division