Exercise 10-1 Compute the Return on Investment (ROI) (LO10-1) Alyeska Services Company, a division of a major oil company provides various services to the operators of the North Slope oil field in Alaska. Data concerning the most recent year appear below Sales Net operating income Average operating assets $ 18,900,000 $ 5,600,000 5 36,700,000 Required: 1. Compute the margin for Alyeska Services Company. (Round your answer to 2 decimal places.) 2. Compute the turnover for Alyeska Services Company. (Round your answer to 2 decimal places) 3. Compute the return on investment (Ron for Alyeska Services Company. (Round your intermediate calculations and final answer to 2 decimal places.) 1. Margin 2. Turnover 3. ROI 0.51 % Exercise 10-8 Computing and Interpreting Return on Investment (ROI) (LO10-1) Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below. Sales Average operating assets Net operating income Property, plant, and equipment (net) DIVE New South Queensland wal $1,891,000 $2,700,000 610,000 $540,000 $ 151,200 $135,000 $ 201,00 $ 211,000 Required: 1. Compute the rate of retum for each division using the return on investment (Ron formula stated in terms of margin and turnove 2. Which divisional manager seems to be doing the better job? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the rate of return for each division using the return on investment (ROI) formula stated in terms of margin and turnover. (Do not round intermediate calculations. Round your answers to 2 decimal places Turnover ROI Margin % Queensland division New South Wales division % Burada Exercise 10-2 Residual Income (LO10-2) Juniper Design Ltd. of Manchester, England, is a company specializing in providing design services to residential developers. Last year the company had net operating income of $440,000 on sales of $1,500,000. The company's average operating assets for the year were $1,700,000 and its minimum required rate of retum was 16% Required: Compute the company's residual income for the year. Residual income Exercise 10-12 Evaluating New Investments Using Return on Investment (ROI) and Residual Income (LO10-1, LO10-2) Selected sales and operating data for three divisions of different structural engineering firms are given as follows Sales Average operating assets Net operating income Minimum required rate of return Division A $ 5,700, 800 $1,140,000 $ 273,600 17.00 Division $ 9,700,000 $ 4,850,000 $ 853,600 17.609 Division $ 8,800,000 $ 1,760,000 $ 188, 400 14.084 Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. 2. Compute the residual income foss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 17% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? Complete this question by entering your answers in the tabs below. Reg 1 Rega Reg 3A Reg 38 Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Do not round intermediate calculations, Round your answers to 2 decimal places.) Margin Turnover ROI % Division A Division B Division % % % % % Reg 1 Reg 2 Reg Reg 38 Compute the residual income (loss) for each division. (Do not round Intermediate calculations. Loss amounts should be Indicated by a minus sign.) Division A Division B Division Residual income (loss)
