Using trial balance data to measure divisional performance The R. F. Cradlestone Com- pany manufactures toys which it sells to stores and wholesalers. The Dollhouse Division is a wholly owned subsidiary of the company. Corporate management evaluates division managers on the basis of divisional performance. Recently, there has been a lot of discussion about what measure of divisional performance is most useful.

To illustrate the differences in various performance measures, you have been asked to compute the return on investment using a number of the more popular ROI measures.

c. Working capital.

d. Sales.

e. Beginning stockholders' equity.

f. Ending stockholders' equity.
g. Average stockholders' equity.
h. Residual income based on a target income of 10 percent of net assets.

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DOLLHOUSE DIVISION Trial Balance December 31, 1992 Debit Credit Cash $ 4,000 Accounts Receivable 12,000 Inventory. 18,000 Prepaid Assets 2,000 Building.... 82,000 Accumulated Depreciation, Building $ 17,000 Equipment ..... 32,000 Accumulated Depreciation, Equipment 13,000 Accounts Payable..... 8,000 Taxes Payable.... 8,000 Notes Payable (long-term) 11,000 Mortgage Payable.. 23,000 Capital Stock... 25,000 Paid in Capital in Excess of Par 5,000 Retained Earnings 20,000 Sales.... 136,000 Cost of Goods Sold 56,000 Advertising ...... 12,000 Sales Salaries and Commissions 9,100 Administrative Salaries 28,000 Office Insurance 1,100 Office Property Taxes 2,500 Office Utilities.... Office Maintenance 3,300 4,000 $266,000 $266,000