Caden

Caden Corporation recently announced a bonus plan to be awarded to the manager of the most profitable division. The three division managers are to choose whether ROI or RI will be used to measure profitability. In addition, they must decide whether investment will be measured using gross book value or net book value of assets. Caden defines income as operating income and investment as total assets. The following information is available for the year just ended:

REQUIRED: (Net Book Value Assets)

Gross Book Accumulated Operating Division Value of Assets Depreciation Income Barker $ 1,920,000 $ 950,000 $ 196,640 Ulster 1,260,000 624,000 158,800 Easton 746,200 423,000 104,920 Caden uses a required rate of return of 10% on investment to calculate RI. / Measure of investment ) x 100 = ROI 1 $ 10.24 % Measure of income ROI using gross book value of assets Barker 196,640 Ulster 158,800 Easton ($ 104,920 ROI using net book value of assets Barker ( $ ( $ 1 x 100 = ) x 100 = / 1,920,000 1,260,000 746,200 $ 12.60 % 1 $ ) x 100 = 14.06 % ) x 100 = % Ulster ) x 100 = % Easton ) x 100 %