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Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is
Lauderdale Corporation is organized in three geographical divisions (regions) with managers responsible for revenues, costs, and assets in their respective regions. The firm is highly decentralized and managers are evaluated solely on divisional performance. Corporate overhead (all fixed) is allocated to the regions based on regional gross margin (regional revenue minus regional cost of sales). The following information is from Lauderdale's first year of operations: Revenues Cost of sales Selling, General and Administrative (all fixed) Corporate overhead Region I $ 1,200,000 450,000 420,000 Region II $ 1,650,000 810,000 630,000 Region III $ 2,250,000 1,140,000 850,000 Total Corporation $ 5,100,000 2,400,000 1,900,000 Information on the division assets in the three regions of Lauderdale Corporation follows: Region I Region II Region III Required: $ 700,000 630,000 1,287,500 a. Compute the division ROI for each of the three regions. b. How have these regions performed? 432,000
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Step: 1
To compute the Division ROI Return on Investment for each of the three regions follow these steps Step 1 Calculate the Net Operating Income Net Operat...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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