Question
Consider the following data for Upper & Lower divisions of a Lakes Co.: Upper Lower Sales $ 1,800,000 $ 4,800,000 Cost of Goods Sold 1,080,000
Consider the following data for Upper & Lower divisions of a Lakes Co.: Upper Lower Sales $ 1,800,000 $ 4,800,000 Cost of Goods Sold 1,080,000 3,120,000 Operating Income 252,000 240,000 Investment in assets 6,300,000 3,000,000 The company's required rate of return is 6.0%. Show your work to support the following calculations:
a. Calculate the ROI for each division.
b. Calculate the Residual Income (RI) for each division.
c. Calculate the Return on Sales (ROS) for each division.
d. Based on the results of your analysis above, what is your concern with the Upper Divisions results? Discuss potential business issues using your analysis above, do not repeat ratio results.
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