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Megatronics Corporation, a massive retailer of electronic products, is organized in four separate divisions. The four divisional managers are evaluated at year-end, and bonuses are
Megatronics Corporation, a massive retailer of electronic products, is organized in four separate divisions. The four divisional managers are evaluated at year-end, and bonuses are awarded based on ROI. Last year the company as a whole produced a 15 percent return on its investment. During the past week, management of the company's Western Division was approached about the possibility of buying a competitor that had decided to redirect its retail activities. (Ifthe competitor is acquired, it will be acquired at its book value.) The data that follow relate to recent performance of the Western Division and the competitor: Competitor Western Division $4,320,000 Sales $2,720,000 Variable costs 75% of sales 70% of sales Fixed costs 883,000 744,000 985,000 300,000 Invested capital Management has determined that in order to upgrade the competitor to Megatronics' standards, an additional $180,000 of invested capital would be needed
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