8.9 h28 The Texon Company is organized into autonomous divisions along regional market lines. Each division manager is responsible for sales, cost of operations, acquisition and financing of divisional assets, and working capital management. The vice president of general operations for the company will retire in September 1985, and a replacement is being sought. A review of the performance, attitudes and skills of several management employees has been undertaken. Interviews have also been held with qualified outside candidates. The selection committee has narrowed the choice to the managers of divisions A and F Both candidates were appointed division managers in late 19X1. The manager of division A had been the assistant manager of that division for the preceding five years. The manager of division F had served as assistant division manager of division B before being appointed to his present post. He took over division F. a division newly formed in 1980, when its first manager left to join a competitor. The financial results of their performance in the past three years are reported below. 1. Texon Company measures the performance of the divisions and the division managers on the basis of their return on investment (ROI). Is this an appropriate measurement for the division managers? Explain. 2. Many believe that a single measure, such as ROI, is inadequate to fully evaluate performance. What additional measure(s) could be used for performance evaluation? Give reasons for each measure listed. 3. On the basis of the information given, which manager would you recommend for vice president of general operations? Present reasons to support your answer. Division A Division F 19X2 19X3 19X4 19X2 19X3 19X4 (000 omitted) Estimated industry sales- market area $10,000 $12,000 $13,000 $5,000 $6,000 $6,500 Division sales $ 1.000 $ 1,100 $ 1.210 $ 450 $ 600 $ 750 Variable costs $ 300 $ 320 $ 345 $ 135 $ 175 $ 210 Discretionary costs 400 405 420 170 200 230 Committed costs 275 325 350 140 200 250 Total costs $ 975 $ 1.050 $ 1.115 $ 445 $ 575 $ 690 Net income $ 25 S 50 $ 95 $ 5 $ 25 $ 60 Assets employed 330 $ $ $ 170 $ 240 $ 300 Liabilities 103 105 115 100 130 Net investment 227 235 123 Return on investment 11% 21% 39% 4% 18% 35% $ 340 360 47 245 140 170