Question
Candy company has two divisions - Chocolate and Carmel. Information about the companys results are as follows: Chocolate Division Carmel Division Total Sales $8,000,000 $12,000,000
Candy company has two divisions - Chocolate and Carmel. Information about the companys results are as follows:
| Chocolate Division | Carmel Division | Total | |
| Sales | $8,000,000 | $12,000,000 | $20,000,000 |
| Operating Profit | 1,000,000 | 2,000,000 | 3,000,000 |
| Average Operating profit | 5,000,000 | 11,000,000 | 16,000,000 |
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Calculate the divisional and total ROI for Candy Company showing the operating margin and the asset turnover rate.
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Calculate the Residual Income of the company and the divisions assuming the required ROI was 15%.
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Which division is doing better? Why? Which division is contributing more to the company?
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