Compare Alternative Measures of Division Performance The following data are available for two divisions of Solomons Company:
Question:
Compare Alternative Measures of Division Performance The following data are available for two divisions of Solomons Company:
The cost of capital for the company is 15 percent. Ignore taxes.
Required
a. If Solomons measures performance using ROI, which division had the better performance?
b. If Solomons measures performance using residual income, which division had the better performance?
c. Would your evaluation change if the company’s cost of capital were 30 percent?
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Related Book For 
Fundamentals Of Cost Accounting
ISBN: 9780073018379
1st Edition
Authors: Michael W Maher, William N. Lanen, Madhav V. Rajan
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