EXERCISE 10–6 Computing and Interpreting Return on Investment (ROI) [LO2]

Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below (the c urrency is the Australian dollar, denoted here as $):

Division New South Queensland Wales Sales ............................................................. $4,000,000 $7,000,000 Average operating assets ............................. $2,000,000 $2,000,000 Net operating income ................................... $360,000 $420,000 Property, plant, and equipment (net) ............ $950,000 $800,000 Required:

1. Compute the rate of return for each division using the return on investment (ROI) formula stated in terms of margin and turnover.

2. Which divisional manager seems to be doing the better job? Why?