ROI, RI, measurement of assets. (CMA, adapted) Carter Corporation recently announced a bonus plan to be awarded to the manager of the most profitable division. The three division managers are to choose whether ROI or RI will be used to measure profitability. In addition, they must decide whether investment will be measured using gross book value or net book value of assets. Carter defines income as operating income and investment as total assets. The following information is available for the year just ended:

paid only to the most profitable division. However, absolute division operating income as ¢)
conventionally computed would not be used. Instead, the ranking would be affected by the relative investments in the three divisions. Options available include ROI and residual income.
Investment can be measured using gross book value or net book value. Each manager has now written a memorandum claiming entitlement to the bonus. The following data are available:

All the assets are fixed assets that were purchased 10 years ago and have 10 years of useful life remaining. A zero terminal disposal price is predicted. Industrial Products’ required rate of . , . . . . . return on investment used for computing residual income is 12% of investment.
REQUIRED Which method for computing profitability did each manager choose? Make your description specific and brief. Show supporting computations. Where applicable, assume straight-line amortization.LO1

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Division Gross Book Value of Assets Accumulated Amortization Operating Income Radnor Easttown $1,200,000 1,140,000 $645,000 $142,050 615,000 137,550