Ferris Ltd. of Australia has two divisions, one in Perth and one in Darwin. Selected data on the two divisions follow:

	Division
	Perth			Darwin
Sales	$	9,000,000		$	20,000,000
Operating income		630,000			1,800,000
Average operating assets		3,000,000			10,000,000

Required: 1. Compute the ROI for each division.

2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16%. Compute the residual income for each division.

3. Is the Darwin Divisions greater residual income an indication that it is better managed?

multiple choice

Yes

No

Required: 1. Compute the ROI for each division. 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16%. Compute the residual income for each division. 3. Is the Darwin Division's greater residual income an indication that it is better managed? Yes No