Presented below is selected information for three regional divisions of Sako Company.

Instructions 

(a) Compute the return on investment for each division.

(b) Compute the residual income for each division.

(c) Assume that each division has an investment opportunity that would provide a rate ol return of 19%.
(1) II ROI is used to measure performance, which division or divisions will probably make the additional investment?
(2) II residual income is used to measure performance, which division or divisions will probably make the additional investment?

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Contribution margin Controllable margin Average operating assets Minimum rate of return West Divisions East 18% South $ 300,000 $ 225,000 $1,500,000 10% $ $ 200,000 140,000 $1,000,000 $ 600,000 $ 400,000 $2,000,000 13%