1.SPF Inc. has two divisions that operate in Pasig City and Quezon City. Selected data on the two divisions

follow:

Division

Pasig City Quezon City

Sales........................................................ 9,000,000 20,000.000

Net operating income .............................. 630,000 1,800,000

Average operating assets........................... 3,000,000 10,000,000

Required:

1. Compute the return on investment (ROI) for each division

2. Assume that the company evaluates performance by use of residual income and that the minimum required

return for any division is 16%. Compute the residual income for each division.

3. Is the Quezon City Division's greater residual income an indication that it is better managed. Explain.

2. MNO, division of Aeon Manufacturing, has assets of 450,00 and an operating income of P10,000

a. What is the division 's ROI

b. If the minimum rate of return is 12% what is the division's residual income?