Question
Henry Food corporation has three divisions. The divisions have the following data for the latest year of operations: Beverage Meat Snacks Sales $24,480,000 $34,000,000 $48,000,000
- Henry Food corporation has three divisions. The divisions have the following data for the latest year of operations:
| Beverage | Meat | Snacks | |
| Sales | $24,480,000 | $34,000,000 | $48,000,000 |
| Average Operating Assets | $6,000,000 | $11,000,000 | $14,000,000 |
| Net Operating Income | $1,738,080 | $1,760,000 | $1,540,000 |
| Minimum Required Rate of Return | 16% | 12% | 15% |
- What is the return on investment for the beverage division (Round to 2 decimals)?
- What is the beverage division's residual income?
Assume that each division is presented with an investment opportunity that would yield a rate of return of 18%.
- If performance is being measured solely by return on investment, will the beverage division accept or reject the opportunity? Why?
- If performance is being measured solely by residual income, will the beverage division accept or reject the opportunity? Why?
answers are: (need explantions & equations)
1a = 28.97%
1b = $778,080
1c = reject
1d = accept
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Philosophy Of Auditing
Authors: Robert K. Mautz
19th Edition
0865390029, 978-0865390027
