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Mason Corporation recently announced a bonus plan to be awarded to the manager of the most profitable division. The three division managers are to
Mason Corporation recently announced a bonus plan to be awarded to the manager of the most profitable division. The three division managers are to choose whether ROI or Ri will be used to measure profitability in addition, they must decide whether investment will be measured using gross book value or net book value of assets. Mason defines income as operating income and investment as total assets. The following information is available for the year just ended: (Click the icon to view the information.) Required Each division manager has selected a method of bonus calculation that ranks his or her division number one. Identify the method for calculating profitability that each manager selected, supporting your answer with appropriate calculations. Comment on the strengths and weaknesses of the methods chosen by each manager Data table using gross book value of assets first and then net book value of assets. (Round the ROI percentages to two Division Gross Book Accumulated Value of Assets Depreciation Operating x100 ROI Income Afton S 2.103,000 $ 1,100,000 $ 220,500 Alden 1,300,000 786,000 156,000 Essex 825,000 531,000 99,900 Mason uses a required rate of return of 10% on investment to calculate R.
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