E10-8 (Algo) Evaluating Managerial Performance Using Return on Investment, Residual Income [LO 10-4, 10-5] Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is available for each division: Sales revenue Cost of goods sold and operating expenses Net operating income Average invested assets Fruit Division Flower Division $ 1,140,000 $ 1,710,000 $ 855,000 1,282,500 285,000 $ 427,500 $ 4,750,000 $ 2,375,000 Orange has established a hurdle rate of 5 percent. Required: 1-a. Compute each division's return on investment (ROI) and residual income for last year. 1-b. Determine which manager seems to be performing better. 2. Suppose Orange is investing in new technology that will increase each division's operating income by $136,000. The total investment required is $2,300,000, which will be split evenly between the two divisions. Calculate the ROI and residual income for each division after the investment is made. 3. Determine whether both managers will support the investment. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 Req 3 Suppose Orange is investing in new technology that will increase each division's operating income by $136,000. The total Investment required is $2,300,000, which will be split evenly between the two divisions. Calculate the ROI and residual E10-19 (Algo) Determining Minimum, Maximum, Negotiated Transfer Prices [LO 10-6] Shaw is a lumber company that also manufactures custom cabinetry. It is made up of two divisions: Lumber and Cabinetry. The Lumber Division is responsible for harvesting and preparing lumber for use; the Cabinetry Division produces custom-ordered cabinetry. The lumber produced by the Lumber Division has a variable cost of $2.50 per linear foot and full cost of $3.50. Comparable quality wood sells on the open market for $7.50 per linear foot. Required: 1. Assume you are the manager of the Cabinetry Division. Determine the maximum amount you would pay for lumber. 2. Assume you are the manager of the Lumber Division. Determine the minimum amount you would charge for the lumber if you have excess capacity. Repeat assuming you have no excess capacity. 3. Assume you are the president of Shaw. Determine a mutually beneficial transfer price assuming there is excess capacity. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Assume you are the manager of the Cabinetry Division. Determine the maximum amount you would pay for lumber. (Enter your answers to 2 decimal places.) Maximum Price Required 1 Required 2 >