1. ROI computations:

Osaka Division:

Yokohama Division:

2.		Osaka	Yokohama
	Average operating assets (a).......................
	Net operating income..................................
	Minimum required return on average operating assets: 15% (a).....................
	Residual income...........................................

3.

EXERCISE 11-6 Contrasting Return on Investment (ROI) and Residual Income LO11-1, LO11-2 Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Osaka Yokohama Sales. Net operating income ........ Average operating assets ........ $3,000,000 $210,000 $1,000,000 $9,000,000 $720,000 $4,000,000 Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. Where necessary, carry computations to two decimal places 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 15%. Compute the residual income for each division. 3. Is Yokohama's greater amount of residual income an indication that it is better managed? Explain