Return on investment computations. The following information relates to the operating performance of three divisions of Walmat Retail Corporation for last year.

Walmat evaluates divisional performance using rate of return on investment (ROD after allocating a portion of the central corporate expenses to each division. Central corporate expenses for last year were $450,000.

a. Compute the ROl of each division before allocation of central corporate expenses.

b. Compute the ROl of each division assuming central corporate expenses are allocated based on divisional investments (that is, allocate 4/15 to the Miami Division, 5/15 to the Kansas City Division, and 6/15 to the Seattle Division).

c. Repeat part b., allocating central corporate expenses based on divisional sales.

d. Repeat part b., assuming that management allocates central corporate expenses based on the number of employees.

Transcribed Image Text:

Miami Division Kansas City Division Seattle Division Divisional Profit Margin before Allocating Central Corporate Expenses to Divisions Divisional Investment Divisional Sales Divisional Employees $ 500,000 $ 500.000 $ 500,000 $ 4,000,000 $ 5,000,000 $ 6,000,000 $24,000,000 22,500 $20,000,000 12,000 $16,000,000 10,500