Mineral Waters Ltd. operates three divisions that process and bottle sparkling mineral water. The historical-cost accounting system reports the following data for 2018:

Mineral Waters estimates the useful life of each plant to be 12 years with a zero terminal disposal price. The straight-line depreciation method is used. At the end of 2018, the Calistoga plant is 10 years old, the Alpine Springs plant is 3 years old, and the Rocky Mountains plant is 1 year old. An index of construction costs of plants for mineral water production for the 10-year period that MineraI Waters has been operating (2008 year-end= 100) is

Given the high turnover of current assets, management believes that the historical-cost and current-cost measures of current assets are approximately the same.

Required
1. Compute the ROI (operating income to total assets) ratio of each division using historical-cost measures. Comment on the results.

2. Use the approach in Exhibit 22·3 to compute the ROI of each division, incorporating current-cost estimates as of 2018 for depreciation and fixed assets. Comment on the results.

3. What advantages might arise from using current-cost asset measures as compared with historicalcost measures for evaluating the performance of the managers of the three divisions?

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Calistoga Division Alpine Springs Division Rocky Mountains Division $ 840,000 $1,320,000 Revenues $600,000 Operating costs (excluding depreciation) 456,000 360,000 720,000 Plant depreciation 84,000 120,000 144,000 $ 264,000 $ 300,000 $ 456,000 $ 360,000 Operating income $156,000 Current assets $240,000 Fixed assets-plant 168,000 1,080,000 $1,380,000 1,584,000 Total assets $408,000 $1,944,000 2012 2015 2017 2018 2008 100 125 135 140 150