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Green Lawn Company has assembled the following data for one of its divisions for the past year. Division B Sales $500,000 Variable expenses 38% of
Green Lawn Company has assembled the following data for one of its divisions for the past year. Division B Sales $500,000 Variable expenses 38% of sales Fixed expenses $ 250,000 Average operating assets 175,000 Minimum Required Rate of Return 30% Required: 1. Calculate the margin, turnover, and return on investment (ROI); round to one decimal place. (3 marks) 2. Assume the manager of this division has been presented with an investment opportunity that would require an investment of $61,000. This investment would create additional sales of $100,000 and operating income of $19.000 a Calculate the return on investment (ROI) for this investment opportunity (1 mark) b. If the manager of this division is evaluated on the basis of ROI, would they accept or reject this opportunity? Explain. (1 mark) 3. a. Using the original data, calculate the residual income (RI). (2 marks) b. List one advantage of using residual income (RI) to evaluate the performance of different divisions. (1 mark) a List one disadvantage of using residual income (RI) to evaluate the performance of different divisions. (1 mark)
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