Biases in ROI computations. Alfonso Sports Clinic uses rate of return on investment

(ROI) as a basis for determining the annual bonus of divisional managers. The firm allocates central corporate expenses to the divisions based on total sales. The calculation of ROI for 2000 for two of its divisions follows:

Indicate several factors that, if present, would bias the ROI measure as Alfonso Sports has calculated it and lead to possible inequities in determining the annual bonus.

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Division Contribution to Central Corporate Expenses and Operating Profit Share of Central Corporate Expenses. Divisional Operating Profit Divisional Investment (assets) ROI.. Tennis Products Division Golf Products Division $100,000 (10,000) $ 90,000 $600,000 15 Percent $ 500,000 (25,000) $ 475,000 $4,750,000 10 Percent